ESG enters the risk and insurance management world

ESG is now, of course, right at the heart of corporate strategy and risk managers in France are adding this crucial area to their portfolio. Insurers are also starting to ask questions about their customers’ ESG strategy. This is, however, at an early stage of evolution. And while the insurance market remains hard, risk managers do not appear to be asking searching ESG questions of their carriers, but they expect this to change over time. Francois Malan, head of internal control and director of risk at construction group Eiffage, is one of the French risk managers who took part in this year’s Risk Frontiers Europe survey that has stepped up to the plate on ESG. “I had to create a new role within my team for ESG. The compliance officer now must help with anti-corruption, which is a major issue regarding the strengthening of obligations. The General Data Protection Regulation (GDPR) is another important area as well as the environment and human rights along the supply chain. This all falls into my area and forms part of the risk map. You must ensure that all employees are aware of the risks and ethics,” he explained. Malan said that ESG is already working its way into negotiations with insurers. However, he stressed that currently it is insurers asking questions of customers and not the other way around. “Insurers are also asking a lot of questions about ESG and broader areas such as whether you are doing business in Russia or what is your cyber security policy. They don’t want to issue policies until these questions have been answered and so it’s no longer just a price guarantee,” he explained. “We are not yet really asking about the ethics of the insurers, perhaps partly because we know them and perhaps also because coverage has been so difficult to secure in recent renewals. At this stage of the market we have less control of selection,” added Malan. Anne-Marie Fournier, risk manager for luxury goods group Kering, said her involvement in ESG is twofold. “I am involved in handling the impacts of our activities on the environment and social impacts and monitoring investments made by our captive,” she said. AMRAE treasurer Alain Ronot believes that a good ESG strategy should lie at the heart of the risk management strategy. “Defining ESG priorities is key for an organisation. It enables you to better understand and decrease environmental and social risk exposures and improve governance. Thus, ESG strategy leads to improved management of these risks and gives more comfort to insurance companies,” he said. Zaiella Aissaoui, risk and insurance director at Bouygues Construction, said she is not in charge of managing ESG risks directly but, as with most of her peers, nowadays contributes to the discussion. “In term of insurance, the insurers have more and more questions about our ESG process, so to maintain our insurance programme at the same level we have to explain our ESG policy regularly,” she added. Philippe Cotelle, AMRAE board member and vice president of Ferma, sees ESG as another opportunity for risk managers to broaden their remit and influence. But he stressed things won’t really take off until these risks can be quantified and any return on investment, from reducing environmental impact for example, can be clearly shown. “There is still quite a dialogue to be had within the risk and insurance sector about ESG and this accompanies the development of captives,” pointed out Cotelle. He sees a parallel with the development of the cyber risk and insurance market. “To be honest, ten years ago we were talking about cyber but no-one was really close to quantifying it. You have to focus on the financial return, this is the only way to get companies to engage seriously. This is the very beginning,” said Cotelle. “This needs a far more sophisticated quantification effort that can lead to a clear case for investment to reduce the exposure. What I have done in cyber through the SPICE project at Airbus and LUCY at AMRAE needs to be done in ESG. This is why AMRAE is active and is currently launching a project CLIMATE currently lead by a dedicated team. It needs to support a much broader risk management effort and this has to be based on the quantification and financial impact,” he added.

ESG enters the risk and insurance management world

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