Page 19 - The Insurance Times November 2025

Legal experts highlight that the use of ripheral concern but is gradually be- fluence regulatory, reputational, and
data analytics and predictive modeling coming a core part of captive insur- investment decisions, captives that
in underwriting decisions may also ance planning, risk management, and adopt forward-looking ESG strategies
come under judicial scrutiny, especially governance frameworks. are expected to gain competitive ad-
where algorithmic bias or transparency AM Best noted that while ESG imple- vantage and stakeholder trust in the
issues are alleged. With climate risks, mentation is still at an early stage years ahead.
cyber breaches, and AI usage all trig- across much of the captive sector, signs
gering new types of claims, insurers of maturity are emerging. This includes ESG integration gains mo-
are being advised to revisit contract formal ESG policies, sustainable invest-
language, claims procedures, and legal ment practices, and enhanced risk dis- mentum among captive
preparedness. closures. Some captives are aligning insurers: AM Best
As risk exposures evolve, the litigation with their parent organisations’ ESG Captive insurers are increasingly em-
burden for insurers is expected to rise, goals, integrating climate risk assess- bracing Environmental, Social, and
reinforcing the need for robust legal ments, and supporting sustainable sup- Governance (ESG) frameworks, ac-
risk management and proactive com- ply chains through tailored coverage cording to a recent report by AM Best.
pliance strategies. solutions. The study finds that while many cap-
The report points out that captives are tives are in the early stages of ESG
AM Best: ESG integration
uniquely positioned to embed ESG into adoption, there is growing momentum
rising in captive insurance their operations given their close link to align with broader corporate
sector to parent entities, greater flexibility in sustainability goals. These include inte-
risk selection, and long-term orienta- grating climate-related risks into un-
Captive insurers are increasingly tion. However, AM Best also observed derwriting, adopting sustainable in-
adopting environmental, social, and challenges, including lack of vestment policies, and enhancing
governance (ESG) principles into their standardised ESG metrics and evolving transparency through ESG reporting.
business strategies, according to a re- regulatory expectations.
cent report by AM Best. The analysis AM Best notes that captives are well-
highlights that ESG is no longer a pe- As ESG considerations increasingly in- positioned to lead ESG integration due
to their close alignment with parent
companies and flexibility in underwrit-
Swiss Re Life & Health halts new business in Austra- ing unique risks. Many captives are
lia to streamline operations now formalising ESG strategies, assess-
ing climate impact on insured portfo-
Swiss Re Life & Health has announced a pause on writing new business in lios, and engaging in proactive risk
Australia, citing the need to realign operations and manage underwriting
management tailored to sustainability
risks more effectively. The reinsurer clarified that this decision does not af-
fect its existing in-force portfolio, claims processing, or partnerships, which metrics.
will continue uninterrupted. However, the report also highlights
challenges, such as a lack of
According to Swiss Re, this strategic move aims to allow a thorough review
standardised ESG disclosure frame-
of its business model, pricing strategies, and capital allocation in the region.
Industry experts suggest that the pause reflects broader profitability con- works and evolving regulatory require-
ments. Despite this, ESG-conscious
cerns and rising claims trends within the Australian life and health insur-
ance market, especially post-COVID. captives are expected to gain long-
term advantages, including stake-
Swiss Re reaffirmed its commitment to the Australian market and intends holder trust and resilience to environ-
to return after recalibrating its approach. The company emphasized that mental and reputational risks.
the move is temporary and is part of a global strategy to focus on sustain-
This growing shift reflects the broader
able, profitable growth and adapt to evolving customer needs and regula-
tory environments. trend of ESG becoming a key
differentiator in risk management, in-
Market watchers believe the decision may prompt other reinsurers to reas- surance planning, and investment
sess their risk appetite in mature markets like Australia, especially as medi- strategies for forward-looking captive
cal inflation and claims unpredictability continue to challenge profitability. insurers.

18 November 2025 The Insurance Times