Some unexpected good news for ESG from the world of insurance earlier this week. Marsh, the world’s largest insurance broker, announced a unique way to recognize leading corporate ESG practices. Through a new partnership with international law firms (including Norton Rose Fulbright and Orrick, Herrington & Sutcliffe) and four participating Director & Officer (D&O) liability carriers AIG, Berkshire Hathaway Speciality Insurance, Sompo International, and Zurich North America, US companies may be able to get preferred D&O coverage terms and conditions on specific ESG-related exposures.
This is good news – but of course, the devil is in the details. Terms are subject to underwriting by the carriers. It is unclear if premium discounts may be part of the package. I imagine there are other elements that need to be worked out in practice, such as the cost of the law firm’s reviews and who pays for those.
Some might call this mere window dressing in an industry under attack for continuing to provide brokerage services and underwriting to carbon intensive companies. I disagree. The insurance industry is extremely conservative and ironically risk averse. For major industry players to develop and deliver a new concept like this is significant. I tried to get traction on a similar idea for environmental coverage when I worked at Marsh in the early 2000s, but there was no interest then. However, these are different times and it is a different world.
If enough companies take advantage of this new offering and make it successful, that will send a strong signal to the industry of market interest in new ESG risk management concepts, leading to more new offerings. But the flip side is also true – if demand is not robust, carriers will likely see no need to innovate further in the ESG space. Marsh has already announced that if this is successful in the US, it will expand the offering globally.