Approximately 69% of the global valuation measures for insurance companies driven by environmental, social and governance factors were negative from April 2020 to March 2021, A.M. Best Co. Inc. said in a report Wednesday.
Weather-related events and governance were the most common drivers of negative ESG ratings, followed by reputation, said Oldwick, New Jersey-based credit rating agency.
Where the weather was the driving force, this was mainly due to companies experiencing weather-related losses that exceeded their expectations, Best said.
"This was especially true for small monolithic insurance companies with geographical concentrations, such as companies that are exposed to floods or wildfires in a single US state," said Best.
Inadequate protection against weather-related losses can lead to impairment of the balance sheet or operating performance, said Best.
"Conversely, companies that exceed expectations and improve their operations ̵
The ESG was a key factor in just 13% of Best's total global rating measures on insurers during the period, the report said. Of these, 31% were positive.
Property damage insurance companies accounted for 85% of rating measures driven by ESG factors and life / health insurance companies for 15%.
Of the rating actions driven by ESG factors during the period, about 72% were in US-based companies as they account for the majority of Best's rating population. Catalog