Recognizing the uncertainty surrounding what environmental, social, and governance (ESG) entails, and what actions or disclosures are expected from insurance and reinsurance companies, AM Best has released a new commentary addressing frequently asked questions about ESG considerations for financial strength and application of ESG within the rating process.
AM Best believes that communicating how it views ESG factors in the context of insurance credit ratings will provide greater transparency to the market. As a result, AM Best has developed an FAQ document to help provide additional background and context. AM Best also is pleased to announce the addition of an ESG section to Best’s Credit Reports under Enterprise Risk Management, which is effective on a rolling basis from Nov. 22, 2021.
Matthew C. Mosher, president and CEO of AM Best Rating Services, stated, “AM Best has always considered ESG risks in our credit rating analysis, when they were material and relevant to financial strength.” In 2018, AM Best’s methodology was updated to identify factors within the ratings process that are considered ESG factors and how these may impact any one of the building blocks used to determine our credit ratings. Mosher added: “The discussion of ESG factors in our methodology allows us to be more transparent as to how these risks impact our consideration of an insurer’s financial strength. The impact of ESG factors on financial strength varies depending on a company’s profile, exposures and level of risk transfer, as well as the markets in which it operates.”
AM Best recognizes that many insurance industry stakeholders seek more information about the impact of ESG. The addition of the ESG section to Best’s Credit Reports will promote transparency, highlight the ESG elements that are relevant and material to the financial strength of an insurance company and help AM Best better evaluate how an insurer manages these ESG risks and opportunities.
To access a complimentary copy of this Best’s Commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=314927.
AM Best also is hosting a briefing on ESG on Dec. 1, 2021. To register, please go to www.ambest.com/conferences/ESGReview/index.html.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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