Time for change as ESG shakes the market model

It was a bumper turnout for risk managers in Liverpool this week for the AIRMIC annual conference and the three letters on the lips of all were ESG.

It is clear that businesses of all sizes are concerned about what their requirements are and will be as the regulatory regime around ESG risks continues to evolve.

What was clear is that there is a gulf between the speed that the risk managers believe the insurers need to be moving to adapt their services to meet the ESG challenges and the speed with which the insurers are moving and believe they are required to move.

New risks with little or no claims data has always been a minefield for the underwriting community and one they will all too often look to avoid in its entirety or, if pushed, to move into the area as cautiously as it can for fear of stepping on a claim which will blow up in its face.

You get the feeling that ESG has created a wider discussion for risk managers and their insurers. It is not simply about providing coverage for claims should they arise; it is also a fundamental shift to a partnership approach where the key weapon in the armoury is not the policy but a risk management strategy which negates any chance of a claim occurring.

It is a very different conversation. Businesses have long understood they have a responsibility to avoid the claim arising in the first place and the need to pay an excess to have a stake in the claim if it occurs.

This strikes observers as a potential sea change. Insurers are making it clear that their role is now to work alongside the client to identify and eradicate any potential for claims well before they occur, and it is a move away from simply providing a promise to pay if the unthinkable happens.

It in many ways goes back to the very heart of insurance which is there to mitigate the impact of the unexpected. These risks, once identified, are no longer unexpected and as such the message is that firms must take steps to meet the challenges they face.

Insurers in Liverpool were bullish that they are engaging with risk mangers in areas where they can deliver meaningful risk prevention and while the market will continue to struggle with areas such as cyber risk where the criminals continue to evolve their attack strategies the view is that ESG will deliver a new way of working.

Jon Guy, Editor

Emerging Risks

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