The move indicates that D&O underwriters are more willing to recognize organizations with strong ESG risk management as better risks. ESG has implications for several insurance lines, including D&O insurance, which is intended to respond to shareholder, derivative, and event-driven litigation, as well as regulatory actions.
Marsh has added new "Side D" entity coverage for regulatory investigation costs relating to climate-related financial disclosures to its London carrier-backed Marsh Delta D&O facility, among other policy enhancements. Clients who are not publicly traded in the United States and score highly using established ESG risk methodologies, such as Marsh's ESG Risk Rating tool, are now eligible for the coverage, which is normally only available to entities after a securities lawsuit is filed.
"Interest in our D&O ESG initiatives has been incredible," said Paul Denny, Marsh Specialty's Global Financial and Professional Liability (FINPRO) Practice Leader. "More insurers recognize the link between good ESG risk management and fewer or less severe D&O losses, and they are willing to reward those with superior frameworks with better coverage." This is fantastic news for our clients, many of whom have prioritized the development of a strong ESG framework for their organizations."
Furthermore, D&O insurers American International Group, Berkshire Hathaway Specialty Insurance, Sompo International, Starr Insurance Companies, The Hartford, and Zurich have agreed to participate in Marsh's ESG D&O initiative, which was launched last October. Under the initiative, US-based or US-listed clients who work with select international law firms to review, strengthen, and/or validate their ESG frameworks will be considered by participating insurers for preferred D&O policy terms and conditions on ESG-related exposures, subject to underwriting.
Marsh has also improved its Lloyd's of London-backed Marsh Alpha D&O facility, which provides "Side A" difference in conditions (DIC) coverage for individual directors and officers who are not indemnified by the corporation. Clients worldwide who perform well in established ESG risk methodologies may now be eligible for an additional reinstatement of policy limits.
And, through its Bermuda affiliate, Everest Insurance® has agreed to provide policy enhancements on Side A / DIC coverage for Marsh clients worldwide with superior ESG frameworks. Enhancements could include explicit coverage for chief sustainability officers, a higher limit for independent board directors, and protection from related fines and penalties.