Broker Marsh has said it is to launch a new initiative which will look to obtain premium rate reductions for firms who have with superior environmental, social, and governance (ESG) frameworks.
Marsh said the initiative is centred around a new directors and officers’ liability (D&O) insurance scheme that will reward US-based clients with superior environmental, social, and governance (ESG) frameworks.
As the COP26 summit begins this week four major insurers have backed the scheme which will see the clients rated for their approach to a range of risks at a time when the D&O sector is growing increasingly concerned around the emerging threat of directors and officers facing challenges from shareholders and activists over their potential failure to implement climate policies that will reduce their carbon footprint and the approach to their supply chain and clients with regards to their impact in the climate.
Under the scheme, participating Marsh clients will engage with select international law firms including Norton Rose Fulbright and Orrick, Herrington & Sutcliffe LLP to independently review, evaluate, and, in some cases, bolster their ESG frameworks.
Subject to underwriting, Marsh clients will then be considered for preferred D&O policy terms and conditions on ESG-related exposures – such as climate change disclosures and representations – from four participating D&O carriers: AIG, Berkshire Hathaway Specialty Insurance; Sompo International; and Zurich North America.
“Our clients have endured one of the most challenging D&O markets in decades, and the risk landscape is only intensifying, especially as it relates to ESG issues like climate change and diversity,” said Maureen Gorman, a managing director in Marsh’s US FINPRO Practice. “As clients continue to invest in ESG initiatives, it is right that they be recognised as a better risk by underwriters. By working with these select law firms, we are ensuring clients have access to leading independent ESG expertise that can help validate and elevate their ESG efforts, becoming eligible for more favourable coverage.”
The broker added the move comes amid an uptick in ESG-related stakeholder activism and litigation, as well as an evolving global regulatory environment. It also demonstrates how investing in robust ESG initiatives can positively impact organisations’ bottom lines.
Amy Barnes, head of climate & sustainability strategy at Marsh, added: “Marsh is proud to introduce D&O coverage enhancements that recognise organisations taking a proactive approach to managing the risks associated with ESG, including the transition to a low-carbon economy. We look forward to replicating this initiative in London and in other parts of the world over the coming months. Marsh McLennan has co-led the product and services development workstream of the Prince of Wales’ Sustainable Markets Initiative Insurance Task Force, and we are pleased to be driving climate positive innovation in our industry.”