Insurers shift focus to more specific climate-related issues

Sustainability-focused frameworks in underwriting practices have grown by 120% since 2022.

Insurers are increasingly shifting their focus from broad environmental, social, and governance themes to a more specific emphasis on climate-related issues, particularly decarbonisation and the transition to net zero, according to a survey by Marsh.

The proportion of insurers integrating sustainability-focused frameworks into their underwriting practices has grown by 120% since 2022.

Many are adopting line-specific approaches, with energy (44%) and construction (36%) receiving the most attention. This focus reflects insurers' commitment to addressing carbon-intensive industries, which often have significant impacts on nature and biodiversity.

Climate and sustainability frameworks now influence underwriting across 80% of product lines, with many experiencing at least double the sustainability influence compared to the previous year, Marsh noted.

The survey also revealed heightened scrutiny of portfolio emissions by reinsurers, with 64% of insurers reporting that their portfolio emissions intensity has been analysed, a sharp increase from 28% last year.

Whilst this scrutiny has not yet led to substantial changes in insurers' policies, Marsh predicts that it could prompt stricter reporting requirements and the development of more robust frameworks in the future.

Climate adaptation and mitigation measures are also becoming a significant factor in underwriting decisions, with 71.4% of insurers actively considering clients' practices in these areas.

The prioritisation of clients' adaptation and mitigation measures indicates a positive shift towards a more sustainable and resilient market, Marsh said.