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To provide some initial information on this, last year Marsh undertook a survey of the UAE insurance market, receiving responses from 23 insurers. These insurers represent a cross section of the UAE insurance market in terms of local, regional, and international insurers and reinsurers.

The survey explores the extent to which ESG factors are already being used to assess clients’ risk profiles and the extent to which this trend might accelerate. It also looks at what incentives insurers might consider giving to clients who are able to demonstrate favourable ESG metrics.

Key findings

1. Do your underwriting models or rating tools consider ESG factors?

52% said NO

39% said YES

9% said DON’T KNOW

39% of respondents confirmed that ESG factors are being considered in underwriting models. These respondents were predominantly international (re)insurers. Risk managers who seek to place their programs with international carriers specifically should be giving ESG due consideration in risk presentations. 18% of the local and regional (re)insurers surveyed indicated they consider ESG factors in underwriting models and it is likely that this number will increase as the local regulatory environment on ESG develops.

2. Do you currently use any ESG rating providers to assess clients?

74% said NO

17% said YES

9% said DON’T KNOW

Almost three quarters of respondents indicated they were not using any external ESG rating providers to assess clients. Given the feedback from the previous question, the results demonstrate that the consideration of ESG factors in assessing clients is either not yet formalised or there is limited information publicly available. As momentum around ESG builds in the UAE, there is a strong chance that insurers will start moving towards including assessment criteria as part of either their portfolio analysis or assessment of individual risks

3. Do you expect ESG factors to play a bigger role in the underwriting process in the future?

84% said YES

8% said NO

8% said DON’T KNOW

The majority of respondents replied that they expect ESG factors to play a larger role in future underwriting. More than one third of respondents highlighted their expectation that they will require clients to provide evidence of their ESG practices. Risk managers should proactively consider how best to present their profile to insurers and how they can differentiate from their peers and the wider marketplace

4. Do you envisage a lower cost of capital for risks that are identified as having positive ESG ratings?

52% said YES

30% said NO

17% said DON’T KNOW

Positive ESG ratings are creating favourable conditions for companies, with just over half of insurers responding that ESG is likely to have positive cost- of-capital implications moving forward. In anticipation of this trend, insureds have an opportunity to position their ESG credentials to take advantage of potential future differentiation

For a closer look at the findings, please click here

Summary

The ESG landscape in the UAE is evolving, albeit at a slower pace compared to markets in other regions. This is to be expected given the differing regulatory environments.

The survey insights give an indicative view of insurers’ direction of travel. There will, of course, be variability in approach, appetite, and application between local, regional, and international carriers as well as different product lines — as insurers establish their position on ESG strategy.

It is also important to stress that many local underwriters in particular, are not currently considering ESG factors and, within certain industry and segments of the portfolio, ESG is yet to make its way to the forefront. 

Despite there being no market-wide approach at present, the majority of respondents indicated that they envisioned ESG playing a bigger role in the future. 

Marsh has conducted similar conversations with carriers outside the UAE and the current lack of a unified approach is a common trait globally. 

Companies in the UAE would be well placed to take a proactive approach to consider how to assess and communicate their ESG profile and journey. Marsh is well placed to support those discussions.

If you would like to know more, please contact Abigail Simpson, Climate, Sustainability & ESG Leader, Marsh McLennan IMEA