The growing number of climate related disclosure obligations at the US state and federal, and international, levels that insurers may be subject to present a growth opportunity for the industry to develop creative solutions, according to Thomas Williams, managing director, environmental product line leader at Markel.
He explained: “If we think about just the creativity within the insurance market, when the SEC rule passes from a financial disclosure standpoint, there could be a D&O product that is the result of that. Thinking about it from the environmental part of ESG, there could be a requirement to actually show how you're financially reserving for that environmental risk right now on a discretionary purchase. But it could become mandatory for people to buy pollution insurance, just like they're mandated by workers comp or general liability.
“So there's a lot of opportunity in the marketplace that the insurance industry is going to be very attuned to and able to create new products to address any challenges.”
Williams’ comments came as he spoke on a panel discussing how to understand and manage the impact of a changing climate and ESG regulatory landscape, at the inaugural Intelligent Insurer Climate Risk & Sustainability in Re/insurance USA 2023 event in Chicago.
He said that he has seen this evolution first hand as a person who's employed in an industry that didn't exist until a pollution exclusion was slapped on a general liability policy.
Williams’ fellow panellists included Stephen Weinstein, chair of the board of directors at Itasca Re and David Edsey, climate director, technical underwriting at Zurich North America, with Ethan Aumann, senior director environmental issues and resiliency at American Property Casualty Insurance Association, moderating the discussion.
The panel also discussed the potential impact of anti-ESG legislation in a number of US states and what it could mean for insurance. More than two-thirds of states have considered bringing in such rules and at least 14 states have brought in legislation to limit the use of ESG measurements in public investments and procurement processes.
However, in spite of this activity, Edsey said the impact of the anti-ESG movement is “not so much right now”, although he added that his company is “watching very closely”.
Weinstein said this pressure is partly responsible for the shift from greenwashing to green hushing, meaning companies were less vocal about their ESG efforts, which he called “unfortunate”. “We shouldn’t surrender in public, we need to defend our underwriting and show how much value it brings,” he said.
Williams added that as ESG has come to the forefront of insurance, Markel had compared a lot of the tenets of its coverage style and found them to be compatible.
“What’s important for the insurance market is that insurers are there providing insurance solutions to the client through the [energy] transition,” he added.
Weinstein added that it was "not possible to put the ESG genie back in the bottle" and the panel also highlighted a recent Bloomberg survey of company leaders that showed that investment in ESG was expected to increase, which the panel said suggests that the anti-ESG movement has encouraged these companies to ramp up ESG investment rather than shy away from it.
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Climate Risk & Sustainability in Re/insurance USA 2023, Thomas Williams, Markel, Insurance, Reinsurance, Chicago, ESG, Growth