Denise Delaney, head of responsible business at Liberty Specialty Markets, will speak at a Luxembourg Actuarial Association (ILAC) event this week on environmental, social and governance (ESG) criteria in the insurance sector. Photo credit: Liberty Specialty Markets

Denise Delaney, head of responsible business at Liberty Specialty Markets, will speak at a Luxembourg Actuarial Association (ILAC) event this week on environmental, social and governance (ESG) criteria in the insurance sector. Photo credit: Liberty Specialty Markets

How are insurance companies integrating environmental, social and governance (ESG) concerns into their overall strategy and daily operations? Denise Delaney of Liberty Specialty Markets shares some of what her firm is thinking and doing.

Tackling and particularly climate change is every insurer’s responsibility, according to Denise Delaney, head of responsible business at Liberty Specialty Markets. That includes selecting which clients to underwrite, what data clients are asked to provide, and how products are designed and claims are handled, she said.

LSM is a specialty and commercial insurer and reinsurer active on Lloyd’s markets in the UK and through other channels. In 2021, it had a combined gross written premium of $8.1bn. Its continental Europe segment posted results of $786m in 2021. LSM is part of the Liberty Mutual Group, which is headquartered in the US and is the world’s 6th largest property and casualty insurer, with $156bn in consolidated assets.

Delaney will address the Luxembourg Actuarial Association (ILAC) at an upcoming conference in Leudelange. She spoke with Delano ahead of the event.

What Delaney will discuss during her talk

“In a nutshell, they’ve asked me to come speak, because, broadly, environmental, social and governance themes have really grown over the decades and exponentially in more recent years, and you can even say months, in financial services and insurance. So they were keen to really bring one insurer’s approach to ESG, and how we’re trying to embed that in everything that we’re doing day to day in our decisionmaking,” stated Delaney.

That includes “how we operate our footprint as a company through to our underwriting and investments. So I’m going to talk a bit about the ESG and climate implications for insurers,” she said. “There is a very active regulatory and reporting landscape, and those expectations are growing.... So we will talk a little bit about how we advance our clients’ resilience, and how we support inclusive growth. And that’s specific to the climate transition and energy transition.”

What “increasing customer resilience” means

“Tackling ESG is very much part of our vision. We do see insurance, at its core, as a force for social good. And every stakeholder, ourselves included, has a role [in] the energy transition.” Liberty Mutual, her parent company, recently published four ESG “strategic focus areas” and Delaney wanted to focus on two of them, “increasing customer resilience” and “enabling sustainable growth”.

“So when I say increasing customer resilience, because we’re in the business of managing risk, we have to be aware of it, and identify and create solutions that help mitigate it.” Referring to all types of natural catastrophes, she commented that “part of our relevance as a company is helping people and organisations be more protected against that and recover against events as quickly as they can.”

This extends to “the choices we can make,” meaning “which kind of companies we work with and choose to underwrite, how we deliver our services. That could be the very nature of the products that we offer in terms of insurance, it could be how we handle claims. There are opportunities to build back better” or invest in “green upgrades” following a client incident, for example.

“The whole of the industry is trying to figure out how to do that in the best way,” she said. “In some instances, public authorities are moving in a certain direction,” which could eventually force insurers to rebuild in “a certain fashion, so it’s a keen area of exploration.”

What “enabling sustainable growth” means

The sustainable growth pillar “is really all about the low carbon economy transition,” Delaney said. “One of the things we concretely signed up to do that is called the , where it’s actually going to assess companies’ plans, where they say, [the company has] a net zero strategy by 2030, 2040, 2050, whatever it is. They’re going to be accredited by the most long standing authorities in this area to say, ‘yes, this is a credible science-backed transition plan’. We were the first major carrier to say we will offer capacity to those companies that have verifiable strong transition plans. That’s the kind of partners that we want to be working with in the future.”

For the moment, the accreditation will not influence premiums, she stated.

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EU and UK regulatory environments still fairly aligned

In terms of ESG regulations, “I wouldn’t say there’s a huge divergence that we’re seeing so far between the UK and in the EU,” said Delaney, who is based in London.

“I think things are moving in considerably the same direction, albeit on perhaps slightly different timelines and on slightly parallel frameworks. I’ll give you an example: the UK came out around [the UN climate change conference] Cop26, to say it wants to be the world’s first net zero financial centre. And as part of that, we and a number of other financial actors will be putting together transition plans to show how we support the UK getting to net zero. I think that’s not at all out of step with the way that the EU and European countries have pursued net zero. The details of what we need to perhaps show and what we need to do might differ, but [there’s] certainly the same thrust across the two.”

ESG data remains a challenge

Insurers are starting to ask clients to provide ESG information, which Delaney conceded was yielding mixed results. “Some of the larger listed companies that have this data, make this data available already, often for the purposes of satisfying investor needs. When you get into the kind of SME and middle market, it is a challenge for privately held [firms]. They wouldn’t necessarily be producing or reporting this information already. And so there is a bit of conversation to be had.”

External data providers are not necessarily the solution either. “They do hit some of the same challenges around the data that is not publicly available [and] how you then get it.”

ESG data will remain a work in progress for a bit longer, as reality needs to catch up with objectives, Delaney indicated. “We always want to balance our desire and need for information with the burden of that on the companies. So as we build out our ESG approach, we are actively looking at how to embed it more deeply into our underwriting practices. It is one of the hurdles where we’re working through at the moment.”

Denise Delaney will address ILAC during an held at the offices of Foyer Assurances in Leudelange, Thursday 28 April, 6:15pm.