Business Insurance, February 1, 2022
Environmental, social and governance-related activities and how companies disclose and report them are coming under heightened scrutiny, leaving businesses exposed to a growing range of risks.
The threat of regulatory enforcement actions, shareholder activism and increased societal concerns around a range of issues have created potential liabilities for a broad range of corporations.
Insurers, reinsurers and brokers are responding to the increased concerns with an evolving stable of insurance coverages, risk management services, technologies and practices intended to transfer or manage ESG exposures.
While much of the focus has been on climate risk and addressing the risk financing needs of businesses as they transition to a low-carbon economy, reputational risks are also coming to the forefront as organizations increasingly find themselves held accountable for ESG issues.
The corporate social responsibility and governance aspects of ESG have always been a risk for companies, but investors and insurers are asking organizations more questions, said Keith Fortson, global head of ESG at Riskonnect, an Atlanta-based risk management technology company.
“There’s been a fundamental shift in the insurer landscape on both the asset side and liability side,” Mr. Fortson said. For instance, many assets held by insurers that used to be considered stable, such as real estate, are changing with ESG concerns and the effect of different weather patterns, he said.
“We are seeing reallocations in assets, and that same lens applies to the liability side. If I am going to write a policy for you, I need to make sure you have all of these risks covered,” Mr. Fortson said.
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