Beazley has now received in principle approval from Lloyd’s to establish its planned ESG focused consortium that will sit under its Market Facilities unit and leverage some third-party capital to underwrite risks that have been scored against environmental, social and governance (ESG) metrics.
The ESG underwriting consortium will sit within Syndicate 4321, which has been set up under the Lloyd’s Syndicate In A Box (SIAB) framework
Operational from 1 January 2022, the ESG syndicate will only focus on offering additional capacity to businesses that perform well against ESG metrics, so it will track some of the underwriting Beazley already undertakes it seems.
The ESG syndicate will be led by Will Roscoe, Head of the Market Facilities Division.
At the time the company said that some third-party capital from investors will support the ESG strategy, providing an interesting opportunity for insurance-linked investors looking to access ESG appropriate strategies.
The syndicate will offer capacity to Beazley clients that can meet the standards of an ESG rating scoring criteria, so they will benefit from access to additional capacity from Syndicate 4321.
Beazley told us that it has partnered with three ratings agencies to provide ESG data: S&P, Reprisk and Sustainalytics.
The company will use the rating agencies scoring categorisations to determine which clients are eligible for additional capacity from syndicate 4321.
Interestingly, Beazley said that Syndicate 4321 will underwrite on a multi-line basis, to ensure diversification and balance.
That means it will accept, to begin, underwriting business including: D&O, healthcare, financial institutions, London market US cyber, property, marine hull, marine cargo and aviation business.
How ESG appropriate a business line such as marine and aviation will be considered will depend on the counterparties written, of course.
All of the premiums received by Syndicate 4321 will be invested responsibly, the company explained, in line with its Responsible Investment Strategy.
Adrian Cox, CEO, Beazley, commented on the launch, “By creating the first specialist ESG syndicate at Lloyd’s, Beazley is taking an early step in delivering our commitment to embed ESG across our organisation, including our underwriting. Beazley has a track record of creating innovative underwriting vehicles and Syndicate 4321 delivers this to clients that have already achieved ESG standards. We continue to support all our clients, at whatever stage they are at in their ESG journey, with meaningful risk management and insurance capacity.”
Will Roscoe, Head of the Market Facilities Division, also said, “Syndicate 4321 is an innovative and tangible way to support those businesses that invest in ESG by offering additional capacity. Evidence demonstrates that businesses with high ESG ratings are likely to have a lower risk profile and we are looking forward to building long-term partnerships with clients that, like us, value doing the right thing.”
Of course, ESG metrics and scoring criteria are not always a signal of ESG appropriateness, rather they are one entities view on appropriateness under its own ESG criteria.
Which is why many of the largest ESG indices include major global tech giants, energy companies, as well as other industries that really serious ESG investors and allocators may not always consider to be appropriate.
But these scoring metrics are a good starting point and with this syndicate launch Beazley will have the first underwriting pool of risk that is supposed to be ESG compatible, which should prove attractive to investors and capacity providers alike.