Oxbow Partners publishes report on ESG Data for Underwriting
January 23, 2023 Miqdaad Versi
Brokers want more consistency and transparency from insurers on how client ESG data is being used
Better Insurance Network and Oxbow Partners report highlights the need for greater industry collaboration in a challenging and fast-moving ESG data environment.
Better Insurance Network, a collaboration network focused on insurance sustainability, and specialist insurance management consultancy Oxbow Partners today released the findings of a joint report exploring how commercial insurers capture and implement environmental, social and governance (ESG) data for underwriting, how they intend to use it in the future, and the challenges the industry must overcome to improve ESG data quality and assessment.
The report, “ESG Data for Underwriting – How (re)insurers can capture and implement ESG more effectively and lead the transition to a more sustainable economy”, revealed a lack of understanding among brokers over how their clients’ ESG data is being used by (re)insurers and a growing frustration over the lack of consistency in the way it is captured.
At the same time, the report highlighted a raft of challenges (re)insurers face in capturing reliable ESG data, as well as the wide spectrum of maturity and a significant degree of uncertainty among (re)insurers over how to implement it in underwriting decisions.
While some (re)insurers said they expected ESG to have a direct effect on pricing and coverage in the future, most are still trying to establish how ESG risks and opportunities relate to them and how to embed ESG considerations in the underwriting process.
The report suggested best practices for (re)insurers to enable them to develop a robust ESG strategy – an essential step to futureproof their businesses given the industry’s direction of travel on ESG.
25 industry stakeholders participated in the study, including insurers, reinsurers, brokers, industry associations, rating agencies and policymakers. Key findings from the report included:
- Standardisation is needed to address inconsistencies in the way ESG data for underwriting is disclosed, captured and implemented in the underwriting process
- Brokers and clients are increasingly frustrated by the lack of transparency from (re)insurers over how ESG is used in the underwriting process and the inconsistency of question sets they receive from underwriters;
- (Re)insurers want to embed ESG data into underwriting dashboards and decision-making processes along with other risk factors;
- Many (re)insurers are attempting to quantify key ESG metrics including greenhouse gas emissions within their underwriting portfolios;
- Some are exploring the potential correlation between ESG and profitability;
- (Re)insurers expect client ESG data to affect risk pricing and/or terms within five years, with insureds with better ESG profiles rewarded with favourable coverage;
- Reinsurers have the potential to demand ESG data from insurers but surprisingly, only a few have used their position in this way;
- Progress accelerated in the past 12 months in the standardisation of ESG data for underwriting, but there is still a long way to go; and
- Greater collaboration between (re)insurers and brokers, including among competitors, is essential to move the industry forward.
Antony Ireland, Founder of Better Insurance Network, commented: “Improving the quality of ESG data for underwriting is vital to enable (re)insurers to better understand the ESG risks, opportunities and impacts within their portfolios and to fulfil their critical role in leading the transition to a more sustainable economy. Greater collaboration between stakeholders is urgently needed to standardise ESG data capture and implementation, which will in turn build greater trust and transparency between underwriters, brokers and insureds on ESG.”
Miqdaad Versi, Partner of Oxbow Partners, commented: “Building an approach for ESG data is becoming increasingly essential for (re)insurers. Despite the known coverage gaps and consistency challenges, ESG data is needed to embed ESG within underwriting. The question for many (re)insurers is not whether to acquire and incorporate ESG data into their underwriting processes, but how to do it in a way that aligns with the outcomes they are seeking and their overall ESG strategy.”
For more information, contact:
Antony Ireland, Founder, Better Insurance Network
[email protected]
+44 (0)7796 461 602
Miqdaad Versi, Partner & Head of ESG, Oxbow Partners
[email protected]
+44 (0)7962 252 804
About Oxbow Partners
Oxbow Partners is a specialist management consultancy exclusively serving the insurance industry. Our clients include leadership teams at the world’s leading insurers, reinsurers, brokers and private equity firms. Our consulting engagements span growth, operations, technology and M&A. We have also built cross-industry expertise in ESG across the insurance sector, with an in[1]depth understanding of the ESG strategy of (re)insurers across the globe. We are uniquely placed to use this expertise in our engagement with (re)insurers on their approach to ESG. Senior executives choose Oxbow Partners when they want a fresh perspective from a high[1]calibre team of industry specialists that thinks deeply about each client’s unique situation and has a track record of delivering insight and impact. We have applied for B Corp certification and expect to receive this in 2023. B Corp is an accreditation for companies that balance purpose and profit. B Corps are legally required to consider the impact of their decisions on their workers, customers, suppliers, community and the environment.
