Zurich urges companies to open up on energy transition risks

Stronger collaboration with clients is the only real way to overcome a lack of data on emerging risks created by the energy transition and deliver the broadest cover possible, says CEO Commercial Insurance at Zurich, Sierra Signorelli, who encouraged companies to open up and let insurers in.

She also told clients that ESG data will generally only be factored into the underwriting – through limits, coverage and price – if it directly impacts the risk, or where specific underwriting positions restrict appetite. In D&O for example, ESG questions may be relevant to the risk, and how these issues are managed and overseen. And she stressed the importance of insurers being transparent about how they use the data they ask for during the underwriting process.

“We are working on some of these emerging transition risk and technologies to make sure the coverage is appropriate. These aren’t risks that we have spent years and years testing and covering, so we are working with customers to really understand the risks. A number of our customers have been hugely helpful in letting us in and helping us understand new technologies for the transition and new aspects of these risks so we can support with coverage rather than adding exclusions,” Signorelli told Commercial Risk.

“This collaboration is really the only way to negate the lack of data on some of these risks. We can look at proxies but it is absolutely better if the customers let us in and help us to understand risks,” she added.

Signorelli explained that Zurich is particularly engaging with its most carbon intensive clients to help them through the transition and ensure it can offer appropriate coverage as they transition. Understanding transition pathways is helping to ensure the insurer is investing in the right places.

“We have set a target on engagement with our most carbon intense customers. This is because we expect them to be going through transformational programmes over the next few years and we want to support them. We are investing in technical capabilities and resources, and that customer engagement helps to validate whether we are investing in and prioritizing the right areas,” said Signorelli.

And while there remain questions about whether insurance managers will receive underwriting credit for ESG data provided to insurers, Signorelli said the information only really has an impact at this point when it directly impacts the risk insured. She said Zurich, for one, isn’t using this data to grade a customer from an ESG perspective to then make decisions on how to price risk.

“Where it increases the risk that would be factored in. But we don’t collect ESG data specifically to then grade a customer from an ESG perspective and decide if we want to give more limit or less limit, and it generally doesn’t influence price,” she said.

“D&O is a line of business where ESG questions can be relevant to the risk transfer. For example, ia mining risks  can potentially impact biodiversity you might ask how this riskis managed and overseen. This could impact the coverage afforded by the policy and we would factor that into the underwriting. But it is  factored into the price and coverage where it impacts risk, not just for simply grading ESG plans,” she added.

“I think is important that we are transparent when we ask for information and tell customers how we are using the data,” the Commercial Insurance CEO concluded.