Transition plans and ESG transparency vital for cover as insurers grapple with EU rules

Insurers will only be able to fully support European clients that comply with a raft of new EU ESG rules because they are subject to the same or similar regulations, as well as pressure from other stakeholders, Mukadder Erdönmez, member of the board of management at HDI Global, warned Anra delegates. But he said HDI Global, for one, is ready to partner with companies that have transparent ESG and green plans in place to support innovation.

The EU is introducing a range of ESG rules and regulations, with several more on the way, that are affecting insurers and their clients, not least as it aims to achieve carbon neutrality by 2050.

Erdönmez told those gathered for the annual Italian risk and insurance manager conference in Milan this week that they will need to deal with rules affecting their organisation, and insurers will do the same.

But this means the insurance market will be restricted in what it cannot or cannot do, which could stifle green innovation and leave some buyers scrambling for cover.

“We are subject to the ESG regulations and that is influencing how we look at things. The investment portfolio is one thing, but at the same time we will not be able to insure companies that are not ESG compliant. And not insuring companies that are not ESG compliant means to a certain extent we will not be able to support the innovation needed for the transformation. So it is really a catch-22,” he said during a keynote speech.

“We have to tighten our underwriting guidelines for existing coal and gas, for example,” with additional pressure coming from NGOs, said Erdönmez.

He explained that insurers can provide cover to energy and other companies but will increasingly need to see a transition plan in place to offer protection.

“We are insuring oil and gas companies or energy companies that have a transition path to green, which allows us to support the transition,” said Erdönmez.

“But it is important that our clients have a transformation path and at the same time that transformation path really needs to be communicated. That is key for us,” he continued.

Transparency from client companies and collaboration between insurers, buyers and brokers will be crucial, he said.

“There are huge opportunities out there but there are also risks out there. This only works with collaboration and total transparency as we work with each other, because as insurance companies we are also subject to ESG regulations,” said Erdönmez.

The insurer was clear that HDI Global, for one, is certainly not walking away from the challenges provided by ESG, as long as its clients, and therefore insurers, are complying with the rules and mindful of the court of public opinion.

“We are ready and willing to invest in the innovation to support our clients through the transition on ESG,” he reassured the audience.