GC’s Moody: Industry must lean in more on the ‘S’ and ‘G’ in ESG initiatives

Reinsurance has a crucial role to play in encouraging ESG efforts, and these will begin to focus more on the social and governance elements over time.

That was the message from Paul Moody, UK CEO of Guy Carpenter, talking to The Insurer TV live in Monte Carlo.

The role of reinsurance behind the scenes has so far helped the wider industry to provide its societal role in facilitating sustainability efforts, particularly related to climate and the environment.

“Insurance has a pivotal role to play in ESG,” said Moody. “Reinsurance provides the background capital, combined with insurance at the front end, [through which] we really have the ability to drive change.

“Crucial to that, in this industry, is understanding and creating coverage for new technologies, new products, public-private partnerships – and getting that right will drive a sustainable approach going forward,” he said.

As regulators continue to pile pressure onto the banks and insurers that underwrite economic development, firms should devote more focus to the social and governance elements of their ESG agendas, he suggested.

From an underwriter’s perspective, the lines of business particularly focused on in London include construction, marine and energy, and aviation.

Quality data and analytics

So far, most in the industry – insurance and reinsurance alike – are firmly focused on the environment amid the increasingly visible consequences of the climate emergency. However, the ‘S’ and ‘G’ will bring demand for quality data and analysis.

“In future, it’s going to move to the ‘S’ and the ‘G’. The second part of the journey is gathering data and information. And the third part is understanding what are the pressing parts of that data and information gathering,” said Moody.

This data and intelligence could relate to the transition from fossil fuels to renewables, or to a firm’s efforts to improve its own diversity and inclusion from the board level down.

“You can explore external accreditations, if you join the Net-Zero Insurance Alliance, for example, you can gather data, and you can also benchmark yourself against peers in that alliance,” he said.

Data, and its effective use, is going to be critical to such efforts, and particularly to ESG efforts on the underwriting front. However, the scale of reinsurers’ treaty books poses a challenge, particularly given the growing compliance aspect of ESG.

“So far, what we’ve seen is direct business dealing with individual clients, where it is easier to get data. It’s a journey, but on an individual per risk basis, you can get more data. The real challenge will come in treaty portfolios, when you’ve got thousands of underlying clients, and how you’re going to gather the data on those portfolios,” he said.

Definition challenge

There will also be issues around definitions for ESG, he noted, which still seems a vague concept at times, versus the insurance industry’s liking for consistent wordings, as well as risks of regulatory inconsistency across borders.

“What regulators are looking at in Europe and the UK may be different to Bermuda, which may be different to the US,” Moody warned.

He identified two consistent themes across the different insurance market regulators.

“The first is, ‘how is climate going to impact your business?’ And the second is, ‘how are you going to manage your investments and underwriting to support a sustainable net-zero economy in the future?’ Those are the two key questions at the moment that I think are consistent across geographies.”

Moody is in discussions with Guy Carpenter’s clients in Monte Carlo about the ESG implications of their business.

Such board-level strategy-setting benefits from group-wide resources at Marsh McLennan, including investment and advisory services from Mercer and Oliver Wyman, he noted, as well as Marsh, where Moody spent much of his career.

In August, Marsh launched a new facility, alongside carriers Liberty Specialty Markets and AIG, to provide up to $300mn of cover per risk for the construction and start-up phases of hydrogen projects globally.

Click to watch Guy Carpenter’s UK CEO Paul Moody speaking with The Insurer TV in Monte Carlo, from the balcony of our Hôtel de Paris pop-up studio suite. Listen for more on: