ESG approach helps buyers secure D&O

There is a growing willingness among D&O underwriters to recognise organisations with strong ESG risk management as better risks, according to Marsh.

The last two years has been particularly difficult for insurance buyers seeking D&O cover. Pricing in financial and professional lines in the first quarter of 2022 once again had the highest rate of increase across the major insurance product categories, at 26%.

In response, Marsh has announced that US-based or US-listed clients with superior ESG frameworks will be considered for preferred D&O policy terms and conditions on ESG-related exposures by participating insurers, subject to underwriting.

“Interest in our D&O ESG initiatives has been incredible,” said Paul Denny, Global Financial and Professional Liability (FINPRO) practice leader, Marsh Specialty. “More insurers see the connection between good ESG risk management and fewer or less severe D&O losses and are willing to recognise those with superior frameworks with better coverage.

“This is great news for our clients, many of which have made building a strong ESG framework a priority for their organisations.”

The London market arms of D&O insurers AIG, Berkshire Hathaway Specialty Insurance, Sompo International, Starr Insurance Companies, The Hartford, and Zurich have agreed to participate in Marsh’s ESG D&O initiative.

Under the initiative, Marsh has announced today several enhancements to directors and officers liability (D&O) insurance offerings that could enable more clients to benefit from superior environmental, social, and governance (ESG) frameworks.

The broker has also introduced “Side D” entity coverage for regulatory investigation costs relating to climate-related financial disclosures within its London carrier-backed Marsh Delta D&O facility.

Clients not publicly traded in the US that score highly using established ESG risk methodologies are eligible for the coverage, which is typically only available to entities after a securities lawsuit has been filed.

And, Everest Insurance®, through its Bermuda affiliate, has agreed to offer policy enhancements on Side A / DIC coverage for Marsh clients globally with superior ESG frameworks.

Enhancements may include explicit coverage for chief sustainability officers, increased limit for independent board directors, and coverage for related fines and penalties.