Mr. Rishin Chief Risk Officer of Universal Sompo General Insurance Company Limited.

ESG, as a concept is now well known across the Globe. For Insurance Companies, going the ESG way has more benefits than some other sectors. The Insurance companies are exposed to wide array of ESG factors both directly and indirectly. Like most companies, the direct ESG factors considers the way in which the Company impacts the environment, and social fabric and the Governance practices that impacts the sustainability of operations and stability of financial markets.

The indirect factors impacting the insurance sector are accumulation of ESG factors faced by the Companies that are insured by the Insurance Companies. Some specific examples of how ESG can impact insurance companies more than other sectors are as under:

Climate change: Insurance companies are specifically exposed to the financial risks arising out of climate change. These include cost of claims from natural disasters and extreme weather events, such as draught and floods that are poised to become more significant in the future as climate change progresses.

Social unrest: Insurance companies are exposed to the financial risks of social unrest. The social unrest leads to higher destruction of public and private property increasing the cost of claims from theft, riots and looting.

Governance risks: Insurance companies are exposed to the financial risks of governance failures, such as corruption and fraud. These could increase the liability losses and other specific frauds.

Insurance sector provides cover to other companies to cover losses from ESG factors. As underwriters of such risks, Insurance Companies are well placed to price the ESG factors in a manner that promote enhanced ESG practices across sectors. This accumulation of ESG factors, places Insurance Companies in a sweet spot where they can create frameworks and benchmarks for ESG. As awareness on ESG factors is spreading, the Insurance Companies can enhance the underwriting to become more sensitive to ESG factors. This can help other companies that are seeking insurance cover to enhance their ESG practices for better insurance terms.

Further, as the Insurance companies enhance the articulation of their exposure to ESG factors, they can be better prepared to either treat, terminate, or transfer such risks. This will increase the sustainability and resilience of Insurance Companies.