Markel’s Proferes: Professional Liability underwriting to change as ESG emphasis grows

New “threads” of underwriting and changes to processes will have to be implemented into professional liability coverages as ESG considerations become more established.

Speaking to The Insurer TV, Jim Proferes, global executive underwriting officer of professional liability at Markel, explained that while this will inevitably impact the pricing of certain risks, it is also a clear indication the industry is supporting its clients’ transition towards becoming more ESG-compliant.

“How the underwriter will price risk may be different than a year or two ago with an existing client, but when thinking about the underwriting community for professional coverages, new question sets will need to be developed,” he said.

“When speaking with customers the conversation around ESG may start as simply as, help us understand your plan, where are you with the planning process, what milestones have you disclosed to regulators, to investors, to your employees? If it’s something such as diversity, equality and inclusion, have you made adequate progress? If you haven’t, how is your board? How are executive leaders managing that process?”

According to Proferes, if you’re an underwriter of employment liability insurance, it is important that ESG initiatives are being zeroed in on.

Many industries are directing more resources towards more ESG-focused products and business lines, especially – according to Proferes – auto manufacturers, companies within the fossil fuel industry, particularly oil, and other carbon-intensive companies such as utilities.

“We’re seeing these industries making very significant shifts in their adjustment of capital budgeting and investment,” said Proferes.

“We’re living in a remarkable time where technology is moving very fast. It’s extraordinary to think that 10 to 15 years from now, we may be in a society where the majority of new car purchases would be electric vehicles, where the majority of energy is produced by solar, wind, hydro, and that we’re at a time where investments are at a level that you’re going to see new technologies evolve beyond those that I just mentioned,” said Proferes.

But clearly this means the risk landscape for corporate risk managers is shifting dramatically, and it’s important the industry is providing awareness where possible.

“Corporate risk managers are always deeply involved in understanding their organisation and looking across their organisation to manage risks, but ESG brings a new level of risk,” he affirmed.

“I hone in on risk managers who are going to be focused on how their company is evolving. They may get into new technologies and they very likely will find the corporation is making much more in the way of disclosures about their carbon footprint.

“Risk managers are going to have to be very [up to speed] with all those new disclosures and ultimately, they’re going to be looking to their insurance providers to solve new risks that come up or be certain that their existing coverage covers these new dimensions of risk and those disclosures that are being made.”

But new risks also bring new opportunities for the industry which Proferes is enthused by.

“As a professional liability underwriter, we’re always attempting to look around corners and see what emerging risks are going to be there for us tomorrow,” he said. “When I think about ESG, and more broadly, professional liability and impactful events, I do believe the industry will start to take a keener focus on the financial services industry, which is going to be integral in funding a number of dimensions of ESG changes, particularly on climate change.”

Trillions of dollars of capital is expected to be invested in new technologies and transitions, Proferes continued.

“When thinking about financial institutions today, they’re often on both sides of the equation,” said Proferes.

“Financial institutions, particularly banks and insurance companies, may have long-standing relationships with industries that may not be viewed as the most carbon-friendly. Yet, there are opportunities to help those companies transition and that will be very critical for insurers, banks and other investment firms in the future.”