ESG report: Bermuda reinsurers lag behind Europe – The Royal Gazette

Updated: May 24, 2022 3:56 PM

Miqdaad Versi from Oxbow Partners

According to a new study, only 14% of surveyed Bermuda reinsurers and insurance-related securities funds have a developed approach to ESG – environmental, social and governance risks.

And the report ordered by the Bermuda Business Development Agency and carried out by management consultants Oxbow Partners, warned that Bermuda was lagging behind Europe in insuring more global risks.

He added: “Only a limited number of Bermudian market players have so far been prominent players in actively working on solutions for developing markets, including microinsurance and parametric triggers.

“Despite being the world leader in ILS funds, the Bermuda market risks falling further behind without fuller participation.”

However, Oxbow, which launched the report today at the BDA’s Climate Risk Summit in Bermuda, said Bermuda is well positioned to address ESG challenges within re/insurance and that the industry “wants to truly have an impact on ESG issues rather than just ticking the boxes”. or respond to external pressures.

He added: “Bermudian carriers have the required technical capacity and the regulator is seen as a pragmatic facilitator.”

Oxbow interviewed over 20 leading Bermudian reinsurers/insurers and ILS funds representing a GWP of over $100 billion and an investment portfolio of over $550 billion for the report, titled ESG in Bermuda: the rising tide.

He said the Bermudian market as a whole is at an early stage in its ESG journey, noting: “Seventy-two percent of companies have started to engage on ESG topics but are in the early stages of their journey. ESG, while 14 percent have a developed ESG approach, however another 14 percent had not taken any formal action.

“It’s not unusual internationally. Most participants saw Bermuda as ahead of much of the world, including the United States – although perhaps lagging behind some parts of Europe.

The survey indicates that investors and shareholders are the main drivers of ESG, while the lack of resources is the main obstacle to the development of ESG.

And he said Bermudian carriers have yet to develop sophisticated approaches to integrating ESG into underwriting, although investment practices are more advanced.

“While some carriers (32%) have incorporated an ESG element into underwriting processes (mainly a simple risk appetite exclusion), only a very small number were beginning to develop more holistic approaches such as net underwriting zero,” he said. .

“Many were wary of blanket exclusions and preferred to support a transition. Ninety-two percent of participants who had not done so already said they intended to integrate ESG into their underwriting approaches in the future. »

“A more developed ESG approach to investing was common: 47% of participants incorporated ESG into their investment process in some way, with many investments outsourced to investment managers. assets adhering to the Responsible Insurance Principles.”

The report says reinsurers need to better document their ESG efforts, as some have done substantial work but have not yet disclosed it. Standardized disclosures will be increasingly required by regulators in the future, according to the report.

Miqdaad Versi, the report’s author and Head of ESG for Oxbow Partners, said, “Many ESG rating tools and ESG adoption surveys have only scratched the surface of how /insurers engage with ESG. For example, on the environment, they often simplistically prioritize general exclusions rather than recognizing the value of supporting a transition. We hope that this extensively researched report on the key elements of our ESG framework will provide the nuances needed to better understand re/insurers’ strategies, the trade-offs they face and the next steps needed.

Stephen Weinstein, Chairman of the BDA, added: “The BDA is pleased to help present this important document at this critical time for the implementation of ESG principles and frameworks in investment, business and public policy strategies. .

“As the Bermuda market pursues its aspirations as a center of excellence and advocacy for climate resilience, climate finance, and ESG-branded business and investment strategies, this report is both a tool for useful acceleration and a valuable future reference point.”

Mary I. Bruner