Time for insurers to reward ESG-conscious buyers, say Portuguese risk managers

Environmental, social and governance (ESG) pledges made by the insurance industry have not yet been translated into rewards for sustainability-focused buyers at renewals, Portuguese risk managers say.

According to participants in the Portuguese leg of the 2025 Risk Frontiers Europe survey, this should already be happening. In fact, sustainability questions on underwriting forms seem to be aimed at excluding potential buyers rather than rewarding deserving ones, they say.

“We have noticed that insurers are increasingly worried about ESG. They want to learn what their clients do in this area, if they make investments in it, and what are the results. They ask about ratings and if independent analysts are involved,” said Jorge Neto, senior insurance manager at Jerónimo Martins, the retail group. “What we do not see is that concern having a positive impact at the time of underwriting. It looks more like a triage system: if an insurer has enough capacity for only one of two clients, it will choose the company that has invested in ESG.”

“ESG ratings have not been integrated into the drivers of underwriting decisions,” he added. “The market must evolve to reward clients who make investments in sustainability. With the effort we have made in recent years, we should be already benefiting from a positive impact on our insurance programmes.”

Demetrio Tahoces, head of insurance risks at energy firm EDP Global Solutions, pointed out that it is possible to find covers that help with the energy transition, but believes insurers shouldn’t go too far in cutting back cover while this take place.

“Decarbonisation processes have required great efforts and driven decisions to discontinue large generation plants. Insurance markets have shown that they understand this process and we have not met difficulties in this transition,” he said. “However, I believe that insurers should not be too radical in their policies to exclude or to reduce coverage for clients that have provided clear proof of their commitments to follow the road towards net zero.”

For his part, André Filipe Rodrigues, chief risk officer at BNP Paribas in Portugal, remarked that the time has come for buyers to pick and choose their underwriters based on their commitments to sustainability.

“We no longer make quotations with insurance companies that do not deserve our trust in terms of ESG,” he said. “Following the current trends, companies that are not competitive in the ESG field will not be able to work with the biggest players in the market.”

A huge concern for Portuguese companies is natural catastrophe risk. Unfortunately, the country still does not benefit from a nat cat scheme that could help society and the economy recover from a large disaster. In Rodrigues’ view, it is high time discussions around such a scheme gathered pace.

“States must be the most important players in the fight against climate change. They must offer policies and initiatives that create benefits for companies and individuals to participate in this process,” he said. “We may have been a tad too insensitive about this topic for too long, but there is no other way. Governments must play an active role and see this fight as a common good.”

More pointedly, the focus should be on the possibility that Portugal could be hit by a huge earthquake like the one that cause widespread devastation back in 1755.

“The debate about earthquake protection should have started a long time ago. If there is a large seismic event in Portugal, as has already happened in the past, it will impact our infrastructure and paralyse the country,” Neto said. “In our company, we have a catastrophic insurance programme in place. Would we be able to recover from a large earthquake? The answer is yes, but we do not live alone in the country. How will critical infrastructures be recovered?”

He continued: “In Portugal, we have an additional issue to consider, which is the high level of public debt. It would be difficult for the country to go out and seek reconstruction financing. So the debate about a catastrophe pool should have been up and running a long time ago. But honestly, what I would have really liked is for the debates to be already finished and decisions made.”

In the meantime, companies are looking at alternatives to transfer their risk exposures, with captives proving to be increasingly popular among risk managers. However, the insurance legislation in Portugal means firms cannot set up captives at home. But this is something risk managers would like to change.

“We have studied the possibility of setting up a captive, but for the moment we prefer to wait for the European legislation to settle down a bit. Solvency II is under review and some countries have made significant regulatory changes to allow the creation of captives within their jurisdictions, especially France. We prefer to wait for more regulatory stability because creating a captive is a long-term investment,” Neto said. “For us, it would be more interesting if we could set up a captive in Portugal, but this debate has not started here yet. We would like it to be a reality in the short term.”

Those that have a captive in place in other jurisdictions, such as EDP, have found it a viable tool to navigate a difficult market, as Tahoces pointed out. “The use of our captive has been on the rise in the course of the past few years and today it is a key part of some of our insurance programmes,” he said.