Insurers’ ESG agenda a growing factor in buying decisions

Sustainability is becoming a bigger and bigger topic for risk managers, particularly in Europe, who are increasingly factoring ESG behavior at insurers into buying decisions, Linda Freiner, group head of sustainability at Zurich Insurance, told Commercial Risk Europe. 

According to Ms Freiner, Zurich is having increasing discussions with clients about sustainability and the topic is higher on the agenda at risk management conferences she attends. This is borne out by the fact that sustainability and ESG risks have been a priority for Ferma during the past few years.

“It is clear this is a topic that is growing for risks managers. Most companies today are looking at this issue. They are looking at it from a climate point of view, a workforce point of view and a digitalisation point of view,” said Ms Freiner. 

She believes this growing interest is in part caused by the changing role of many risk professionals, who are more focused on risk management rather than just insurance.

Ms Freiner explained that climate change is top of the ESG list for most risk managers, who are working alongside sustainability teams and insurers to try and tackle the threat. “This is because of the impact we are already seeing from extreme weather events, but also because of regulatory pressures,” she said.

“Risk managers are trying to work out how they can best work with their sustainability teams. The risk managers traditionally look at short-term risk, while the sustainability team looks at more of the long-term topics. Having these two functions come together is really important. We, as an insurance company, can come in and try to help with that. People are turning to us because they know we have the knowledge,” added Ms Freiner. 

And as with insurance companies, the focus seems greatest at European firms. 

“Companies in Europe are much further advanced on an overall basis with sustainability strategies and looking at climate change – partly because regulation is much more advanced. So, companies are forced to think about these issues. The movement is broader in Europe but it’s now moving fast in other parts of the world,” said Ms Freiner. 

She added that the focus on ESG and such strategic risk is providing a big opportunity for risk managers to get in front of their boards and add clear value. But to do this requires risk managers to be comfortable in dealing with the issues, she stressed.

“Often, boardrooms want to have clear answers and we are all looking into a crystal ball. So we have to tread quite carefully. But I think the debate is turning much more onto what the long-term and emerging risks are,” she said.

The pandemic seems to have accelerated these discussions and increased the urgency to tackle the risks. “Covid-19 has opened things from a risk point of view, with people realising what can occur. But it also opens up new ways of working. We have learnt to work in a completely different way and many of us won’t be going to go back to the office full-time. Things are going to look very different. People working remotely has also accelerated cyber risk. So, ESG is an even bigger topic than it was before,” said Ms Freiner. 

She said that efforts by insurance companies to tackle ESG issues are increasingly coming up in discussion with clients and driving who they decide to work with. She added that this is likely to become a bigger factor as the next generation comes through into more senior risk management roles. 

“ESG was previously a checkbox factor, but companies are now starting to look much more at who they are working with – what is that company actually offering? So, in pitches we are asked to present on what we are doing on sustainability, our purpose, what we stand for and the products that we are offering in this space. This is definitely becoming more of a selection criteria when clients choose which insurance company they want to work with,” said Ms Freiner.

“We are also preparing for the next generation of customers that care even more about this topic. That will be a trend on the retail side, but these generations are also coming into manager positions within companies. So it’s a trend we just have to be on top of,” she concluded.

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