Category: ESG fundamentals · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-10
ESG due diligence in insurance is the structured pre-bind process by which an underwriter examines a proposed risk’s environmental, social and governance profile, typically through expanded proposal forms, supporting documentation review and rating-agency data triangulation. It has become routine across UK and Lloyd’s market underwriting for D&O liability, professional indemnity, large property and casualty, and credit and political risk.
Category: ESG fundamentals Also known as: ESG underwriting due diligence, sustainability due diligence underwriting, ESG DD Established / Date: Embedded in UK market practice c.2020–2022 Related concepts: ESG insurance underwriting, ESG screening insurance, ESG underwriting policy
ESG due diligence in an insurance context is the pre-bind information-gathering and evaluation exercise undertaken by an underwriter to understand the proposed risk’s ESG exposure and management. It is distinct from ESG screening (which is a binary or graduated filter applied earlier in the underwriting workflow) and from ongoing portfolio monitoring (which assesses bound risks against ESG criteria over the policy life).
Typical due diligence outputs include a documented assessment of the risk’s industry-specific ESG exposure, evidence of governance and management quality, an evaluation of any material ESG controversies, and identification of any required underwriting conditions (warranties, exclusions, sub-limits, premium loading). The depth of due diligence is calibrated to risk size, sector materiality and the insurer’s internal ESG underwriting policy.
The discipline is informed by the UN Principles for Sustainable Insurance (launched June 2012) [1], the PRA’s SS 3/19 [2] and Lloyd’s ESG strategy [3], but no UK statute prescribes a single due diligence methodology.
UK regulatory expectations on ESG due diligence in underwriting flow primarily from prudential supervision. The PRA’s SS 3/19 of April 2019, updated July 2020, requires PRA-authorised insurers to embed climate-related financial risks within underwriting and risk management [2]. The PRA’s Dear CEO letter of October 2021 reinforced expectations of effective embedding by year-end 2021. Where ESG due diligence is part of mandatory know-your-customer or anti-money-laundering processes (governance, beneficial ownership, sanctions exposure), it intersects with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692).
The FCA’s expectations under PS23/16 emphasise that firms relying on third-party ESG data must understand the methodology and exercise independent judgement [4]. ESG due diligence supporting D&O underwriting must also be conscious of the policyholder’s own statutory disclosures under section 414CB of the Companies Act 2006 and section 54 of the Modern Slavery Act 2015.
In the Lloyd’s market, ESG due diligence has been embedded in pre-bind workflows since the December 2020 publication of the Lloyd’s ESG strategy. Managing agents are expected by Lloyd’s to operate documented ESG underwriting frameworks proportionate to risk size and sector. The 2022 Lloyd’s coal, oil sands and Arctic energy underwriting restrictions in particular require pre-bind due diligence on revenue mix and operational footprint of insured groups.
UK composite insurers, including major D&O and financial lines carriers, operate sector-specific ESG due diligence checklists for high-impact industries (energy, extractives, agriculture, food and beverage, fast fashion). Brokers are typically asked to supply: copies of the insured’s most recent TCFD-aligned disclosure or equivalent climate report; modern slavery statement; board composition and diversity data; CDP or other voluntary disclosure submissions; relevant ESG rating agency reports; and details of pending or threatened ESG-related litigation.
UK businesses should expect ESG due diligence to add to the volume of information requested at proposal and renewal. SMEs may face a shortened ESG questionnaire of 5–10 items, while larger corporates can expect 20–40 detailed questions. Businesses with structured ESG governance — typically a board-level sustainability committee, an annual TCFD-aligned disclosure and externally assured greenhouse gas reporting — find the process less burdensome and may secure preferential terms.
Failure to respond meaningfully to ESG due diligence requests is increasingly cited by underwriters as a reason for declining capacity or imposing exclusions, particularly in sectors directly addressed by Lloyd’s restrictions.
A UK mid-market food processor applies for a £15 million combined D&O and crime programme. The broker compiles an ESG due diligence pack including the company’s section 54 modern slavery statement, supply chain audit summary, food safety regulator inspection history, board composition and a Sedex SMETA audit covering the largest facility. The lead UK underwriter accepts terms at flat pricing with no ESG-specific exclusions but adds a warranty regarding ongoing publication of the modern slavery statement and supply-chain audit completion.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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