Arti Mulik , Head  of Underwriting, Universal Sompo General Insurance Company

Term ESG - Environmental, Social and Governance is gaining lot of attention in the recent time. ESG principles are adopted by the companies to ensure their operations does not hamper environmental and social development and don’t go against corporate governance standards. Companies having good ESG score are attracting more investors.  Investments are no longer only related to the value for money, but it is an investment in sustainable future.

Insurance plays an important role in the entire business value chain. Sustainable insurance   approach leads to activities which are done in forward-looking way by identifying, assessing, managing, and monitoring risks and opportunities associated with environmental, social and governance issues.  Sustainable insurance aims at developing innovative solutions by adopting systematic tool-based analysis which helps to improve business performance in such a way that it contributes to environmental, social, and economic sustainability.

In the current era, the traditional underwriting approach is not sufficient due to various emerging risks on account of “Climate Change”.  There is a shift from traditional methods of underwriting to AI based tools, risk modelling and use of machine learning into the risk selection methods, pricing of risk and thereby increasing the efficiency of the entire underwriting process.

Underwriters are very much on the front lines of the ESG revolution in Insurance. Given the challenges faced because of non-availability of the structured data to study the changing weather patterns and its resultant impact on wide range of climate risks, estimation is very difficult. Emerging risks range is very wide right from the physical damage caused by more frequent and severe storms to disruption caused due to transition to a greener economy.  Not only Property underwriters are focused on reducing their exposure in carbon intensive business to renewable energy segments but Liability underwriters are carefully watching the growing number of ESG-related litigations and taking forward looking approach to analyse which sectors will face such litigations in the future.

Underwriter by taking more proactive steps can provide innovative solutions to manage the emerging climate risk effectively and help to create more sustainable economy.