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    ESG Data for Underwriting - How can insurers capture and implement ESG data more effectively?

    February 2023

    ESG Data for Underwriting - How can insurers capture and implement ESG data more effectively?

    We are delighted to have contributed to the recent report 'ESG data for Underwriting' (Better Insurance Network & Oxbow Partners), published 23 January 2023.

    The report from Better Insurance Network and Oxbow Partners, assesses how (re)insurers are tackling the key issues related to ESG data in the underwriting process, and developing their ESG data agendas, their visions for how ESG data should be used in the future, and the crucial role collaboration must play in making progress at both company and industry level.

    ESG creates both risk and opportunities for insurers to grow their business, that provides another lens through which to view risk selection and appetite. The door is open for them to build competitive advantage by imposing their own view of ESG risks, redefining risk appetites, and incorporating ESG into the decision-making process. Insurers can also critically engage with their insured entities, especially those with emission-intensive activities, on their decarbonization strategies and net-zero transmission paths.

    Salman Siddiqui (Senior Director, Insurance Practice Lead at Moody's Analytics) said, "We've never seen a topic evolve this fast. The market needs to talk consistently about ESG, even if companies take different internal views. Our long-term vision is to create a market standard across the value chain."

    In 2022, Moody’s and Lloyd’s (re)insurer Chaucer collaborated to develop an ESG scoring and management solution – the ESG Balanced Scorecard – which enables (re)insurers to implement a consistent enterprise-wide approach to ESG risk assessment across their underwriting, investments and operations. Paul McCarney (Senior Director, Insurance Product Strategy at Moody's Analytics) said "Insurers want ownership and accountability of the methodology they use. Our flexible approach gives them the framework to do so."

    How will insurers use the ESG Balanced Scorecard?

    The ESG Balanced Scorecard gives insurers a holistic view of ESG risks, supporting them in understanding and managing the impacts underlying companies have on people and planet as well as the financial impact on the company from ESG risk.

    How do insurers’ approaches vary?

    Some companies may want one scoring mechanism for all lines of business and investments while others may prefer a more nuanced approach as not all ESG criteria are relevant for every industry. Some may also want to take a different approach between underwriting and investments.

    Where is there most room for improvement in ESG data?

    The biggest challenge is accessing SME and private company data. We take a modelled approach to this universe and are working hard to bridge the gap between the large companies, which have a lot of disclosure, and small companies, for whom disclosure is very patchy.

    This is a fast-evolving topic and we’re sure our solution will look very different in two years’ time because so much will improve in ESG data.

    Read more by downloading the report from Oxbow Partners' website today.

    Learn how the ESG Insurance Underwriting solution can help your organization efficiently integrate ESG scores into underwriting risk selection. Request a demonstration today.