Greater collaboration on ESG data between reinsurers and brokers is essential to move the industry forward

Brokers want more consistency and transparency from insurers on how environmental, social and governance (ESG) client data is being captured and used, according to Better Insurance Network and Oxbow Partners’ latest report – published today (23 January 2023).

ESG is a framework that is embedded into a company’s strategy that looks at how value can be generated for all stakeholders such as employees, customers, suppliers and financiers.

The joint report – entitled 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 reinsurers.

According to the report there is a growing frustration over the lack of consistency in the way ESG is captured.

Antony Ireland, founder of Better Insurance Network, said: “Improving the quality of ESG data for underwriting is vital to enable reinsurers 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.”

The report noted that progress has accelerated in the past 12 months in terms of the standardisation of ESG data for underwriting, but there is still a long way to go. 

ESG strategy alignment

The report – which explores how commercial insurers capture and implement ESG data for underwriting – highlighted the need for greater industry collaboration in the “challenging, fast-moving ESG data environment”.

Approximately 25 industry stakeholders participated in the study – including insurers, reinsurers, brokers, industry associations, rating agencies and policymakers.

Miqdaad Versi, partner at Oxbow Partners, said: “Building an approach for ESG data is becoming increasingly essential for reinsurers. Despite the known coverage gaps and consistency challenges, ESG data is needed to embed ESG within underwriting.

“The question for many reinsurers 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.”