Page 40 - The Insurance Times July 2025

Greening the Policy

How ESG is Reshaping Life and General Insurance

Portfolios

A s climate risks grow and societal expectations shift, En- The Life Insurance Corporation of India (LIC) and leading
private players are beginning to incorporate sustainability
vironmental, Social, and Governance (ESG) principles
are redefining the way insurance companies operate and criteria in their investment mandates, especially in sectors
invest-globally and in India. Once seen as compliance tools, like renewable energy, green infrastructure, and ESG-rated
ESG frameworks are now strategic imperatives influencing corporate bonds. While general insurers are slower in port-
underwriting policies, investment choices, risk management folio greening, many are exploring climate risk modeling for
practices, and product innovation. property insurance and green auto insurance products for
EVs.
Global Momentum in ESG-Driven Insur-
ESG-Linked Premiums and Product Inno-
ance
Globally, insurers are moving from passive ESG alignment vation

to active integration. European insurers, in particular, have One of the most significant trends is the development of
taken the lead by aligning portfolios with the EU Sustain- ESG-linked premiums. These pricing models offer discounts
able Finance Disclosure Regulation (SFDR) and net-zero tar- or incentives for policyholders who demonstrate sustainable
gets. US-based insurers are increasingly incorporating cli- behavior-owning electric vehicles, installing solar rooftops,
mate risk stress testing, while Asia-Pacific markets are in- adopting green building practices, or implementing robust
novating around parametric insurance and biodiversity- ESG disclosures (for corporate clients).
linked underwriting.
For example:
International insurers such as AXA, Allianz, and Swiss Re are Green Motor Insurance: Some Indian insurers now of-
using sustainability scores to price premiums. ESG criteria fer reduced premiums for EVs and hybrid cars.
are now shaping risk appetite: sectors like coal, deforesta- Sustainable Crop Insurance: Weather-linked paramet-
tion, and high-pollution industries are being excluded from ric products are being piloted to support climate-resil-
coverage or charged higher premiums. This reflects a stra- ient agriculture.
tegic shift where insurers act not just as risk carriers but as
Wellness-Linked Life Policies: These incentivize healthy
climate influencers.
behavior and are expanding to include social determi-
nants like gender equality and community engagement.
India's Growing ESG Insurance Footprint

In India, ESG in insurance is still emerging but rapidly gain- Such innovations signal a proactive shift from protection to
ing traction. Regulatory nudges by SEBI on ESG disclosures prevention, positioning insurers as partners in sustainable
and IRDAI's focus on long-term climate resilience are en- development rather than just financial compensators.
couraging insurers to act. Public and private insurers alike
are being nudged to embed ESG into their underwriting, Sustainable Investment Mandates
investment strategies, and product design. Insurers, as large institutional investors, wield immense

36 July 2025 The Insurance Times