More clarity and transparency needed with ESG underwriting, says Grewenig

Swen Grewenig, member of the GVNW committee and head of insurance at a leading international German company, is yet another European risk and insurance manager who said during this year’s Risk Frontiers Europe survey that clarification is needed on how ESG is taken into account by underwriters. Many risk and insurance managers who have taken part in this year’s survey – sponsored by HDI Global and Charles Taylor – have said their role has changed significantly and drawn more attention from the board following recent crises, along with the rise of ESG. Grewenig said that in his case not much has really changed because risk and insurance has always been taken very seriously by his firm, which operates chiefly in the high-risk life-science sector. But he does recognise that for most risk and insurance managers, this era of polycrisis has undoubtedly enhanced their profile and underlined the value they bring to the wider business. “The beauty of working for a company with a significant risk profile is that risk financing and transfer has been on the corporate agenda for decades already. Especially in these days, an insurance risk manager has the opportunity to provide at least a certain, and hopefully relevant, relief for the all the risks identified, assessed and mitigated beforehand, and now exposing the corporate balance sheet. They are in the position to have access to a toolbox to provide this relief,” he said. ESG is rapidly working its way into the relationship between corporations and their insurance partners. For now, it is very much a ‘one-way street’ with underwriters asking the questions and not really explaining how the information will be used, if at all. Grewenig, along with many of his peers, would like to see this change and a more transparent process adopted with true dialogue. “ESG has been present for quite a while already. Whereas it seems still to be a one-way street, ie insurers asking ESG-related questions and [without transparency] making the answers part of their underwriting decision. We would prefer to have a dialogue with the carriers in this context,” he said. “We actually do not know exactly what the insurance companies do with ESG-related information they are asking for directly from the insured or grab indirectly from public sources. However, an [allegedly] negative ESG assessment by insurers will have consequences in various lines of business,” added Grewenig. The GVNW committee member generally views the rise of ESG as a positive thing but he is fearful about “excessive bureaucracy”. “Many companies have looked after topics that are now labelled as ESG for many years already. With ESG, these topics now may be tackled in a more structured way, which may allow for better decision-making, transparency and risk mitigation. However, there is a risk of excessive bureaucracy,” he said. Asked to identify the big risks facing corporations over the next 12 months, Grewenig was another GVNW member who picked out the major systemic risks that firms the world over are finding more difficult to insure, notably business interruptions and natural catastrophes. He added that his colleagues in corporate risk management are concerned about social and macroeconomic trends, research and development and IT. There has been overwhelming support among GVNW members and their peers across Europe during this year’s survey for the formation of public private partnerships (PPPs) at national or EU level to help cope with risks that the commercial insurance sector struggles with. Grewenig agrees that PPPs and state-backed vehicles are the way ahead in difficult areas for commercial insurers. But he noted that while some European governments appear open to the concept, there doesn’t seem to currently be any appetite in Germany. “To the extent the private sector is sneaking out of specific areas, the public sector will gain more and more importance. However, in Germany the political perception seems to go in a different direction,” he said. There was much dissatisfaction among GVNW members at how the industrial insurance market dealt with the “market correction” from 2017 to 2019, but, at the same time, a general acceptance that it was needed after the long soft market started to hammer insurer results. The boot is now firmly on the foot of insurers and, despite recently vastly improved results in the commercial and industrial insurance sector, the carriers are finding many reasons to maintain a tough stance. Grewenig, along with most of his peers, does not expect a significant softening any time soon. “If I were CEO of a commercial insurance company, I would be extremely happy about the current situation, and I do not expect that the feeling will disappear any time soon for the broader market. PD/BI was the most challenging line of business in 2023,” he said. One important way in which Europe’s risk and insurance managers have been coping with the tough market has been raising retentions and using captives. Grewenig manages two captives for his corporation and agrees they are a very useful tool. Cyber has been one of the most challenging areas for GVNW members in recent times as prices rocketed as capacity dried up. The outlook is more positive now as fresh capacity has arrived and appetite improved among the existing market. But terms and conditions remain difficult for most and there is still dissatisfaction with the level of information demanded by carriers. A market-wide wording, or at least set of questions to make this simpler and more efficient, would be welcomed by most risk and insurance managers. “Simpler and more efficient would be a good start,” commented Grewenig. “However, at least for large corporates, cyber insurance needs to regain relevance in terms of real risk transfer at reasonable terms and conditions,” he said. Insurers also need to up their game in terms of service and cost, agree most risk and insurance managers. The overall cost of doing business needs to be reduced and simplified. Insurers need to make a renewed effort to deliver more innovative coverage and contract certainty when and where it is needed. “Insurers seems to have discovered service fees as a nice, risk-free income stream. However, increasing costs often do not come along with service quality in terms of accuracy, completeness and timeliness,” concluded Grewenig.

More clarity and transparency needed with ESG underwriting, says Grewenig

Want to read this article?

Read Next

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

Want to read this article?

Read Next

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

Related Articles