Marsh enhances global D&O policy for businesses with ‘superior’ ESG

Broker  Marsh has made several enhancements to its directors and officers liability (D&O) insurance offerings to enable businesses with “superior” environmental, social, and governance (ESG) frameworks to obtain better coverage.

The move signals a greater willingness among D&O underwriters to recognise organisations with strong ESG risk management as “better risks”.

Marsh noted that ESG has consequences for a number of insurance lines, including D&O insurance, which is designed to respond to shareholder, derivative, and event-driven litigation, as well as regulatory actions.

Among the policy improvements,  Marsh has introduced new “Side D” entity coverage for regulatory investigation costs relating to climate-related financial disclosures within its London carrier-backed  Marsh Delta D&O facility. Clients not publicly traded in the US that score highly using established ESG risk methodologies, including  Marsh's ESG Risk Rating tool, will now be eligible for the coverage, which is typically only available to entities after a securities lawsuit has been filed.

“Interest in our D&O ESG initiatives has been incredible. More insurers see the connection between good ESG risk management and fewer or less severe D&O losses and are willing to recognise those with superior frameworks with better coverage,” said Paul Denny (pictured), Global Financial and Professional Liability (FINPRO) practice leader at Marsh Specialty.

“This is great news for our clients, many of which have made building a strong ESG framework a priority for their organisations.”

In addition, the London market arms of D&O insurers American International Group, Berkshire Hathaway Specialty Insurance, Sompo International, Starr Insurance Companies, The Hartford, and Zurich have agreed to participate in  Marsh's ESG D&O initiative, launched last October. Under the initiative, US-based or US-listed clients that engage with select international law firms to review, bolster, and/or validate their ESG frameworks, will be considered for preferred D&O policy terms and conditions on ESG-related exposures by participating insurers, subject to underwriting.

Marsh has also enhanced its Lloyd’s of London-backed  Marsh Alpha D&O facility, which provides protection for individual directors and officers not indemnified by the corporation, known as “Side A” difference in conditions (DIC) coverage. Clients globally that score highly using established ESG risk methodologies may now be eligible for an extra reinstatement of policy limits.

Finally, Everest Bermuda has agreed to offer policy enhancements on Side A / DIC coverage for  Marsh clients globally with superior ESG frameworks. Enhancements may include explicit coverage for chief sustainability officers, increased limit for independent board directors, and coverage for related fines and penalties.

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