Category: ESG fundamentals · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-10
ESG exclusion criteria in insurance specify the activities, sectors or counterparties that an insurer or syndicate will not underwrite, or will underwrite only subject to restrictive conditions, by reference to environmental, social or governance considerations. The most visible UK exclusions are Lloyd’s market-wide restrictions on thermal coal, oil sands and Arctic energy underwriting.
Category: ESG fundamentals Also known as: ESG exclusions, coal exclusion clause, thermal coal exclusion Established / Date: Lloyd’s market-wide ESG exclusions effective 1 January 2022; full run-off by 1 January 2030 Related concepts: ESG screening insurance, ESG underwriting policy, ESG insurance underwriting
ESG exclusion criteria comprise the documented list of activities or counterparties that an insurer’s underwriting policy prohibits or restricts. Exclusions may be absolute (no business written) or conditional (business written only where specific thresholds, transition commitments or warranty wording are satisfied). They typically operate at three levels: at activity level (e.g. thermal coal mining), at counterparty level (e.g. companies with more than 5% revenue from thermal coal mining) and at policy clause level (e.g. exclusion wording within a bound policy).
The most prominent UK examples are the Lloyd’s market-wide restrictions adopted under the Lloyd’s ESG strategy of December 2020 and Market Bulletin Y5410 of November 2021 [1]. From 1 January 2022, Lloyd’s managing agents may not provide new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities. Existing exposures must be run off by 1 January 2030. Many UK composite insurers including Aviva, Legal & General and Zurich UK have adopted parallel or stricter exclusions.
Exclusions are conceptually distinct from policy-level coverage exclusions for ESG-related liabilities (for example, greenwashing or climate litigation exclusions), although the two interact in underwriting practice.
Some ESG exclusions are required by statute. The Cluster Munitions (Prohibitions) Act 2010 prohibits the use, development, production, acquisition, retention and transfer of cluster munitions by any person in the UK [2], making insurance facilitation of such activity impossible. The Land Mines Act 1998 imposes parallel restrictions on anti-personnel mines. The Sanctions and Anti-Money Laundering Act 2018 and Office of Financial Sanctions Implementation lists impose mandatory exclusions on sanctioned persons and entities.
Other exclusions are market-driven but supervised. The PRA’s SS 3/19 of April 2019, updated July 2020, expects PRA-authorised insurers to embed climate risk in underwriting, and Lloyd’s expects its managing agents to apply the market-wide ESG exclusions [3]. The FCA’s PS23/16 SDR regime requires labelled sustainability investment products to operate within disclosed exclusion policies [4].
In the Lloyd’s market, the post-2022 thermal coal, oil sands and Arctic energy exclusions have substantially reduced available capacity for these activities in London. International capacity from Bermuda, Asia and continental Europe has partly absorbed displaced risks, but pricing for coal-related risks has risen materially. Lloyd’s syndicates operate compliance monitoring and reporting against the ESG strategy targets, with annual progress publicly disclosed.
UK composite insurers commonly publish their underwriting exclusion policies on their corporate websites, including specific revenue threshold tests (often 5% or 10%) for restricted activities. Specialist sectors including controversial weapons, civilian firearms and tobacco are subject to widely-adopted exclusions by mainstream UK underwriters. The ABI Climate Change Roadmap of July 2021 supports the development of consistent industry approaches [5].
UK businesses with direct or significant revenue exposure to excluded activities face restricted capacity, premium loadings and potentially policy-level exclusion endorsements. Businesses on the boundary of exclusion thresholds — for example, with thermal coal revenue close to 5% — should expect detailed revenue verification questions and may face an “ESG escalation” referral within the insurer to senior underwriting or compliance staff.
Businesses in transition (legitimately reducing reliance on excluded activities) should document the transition strategy, including capital expenditure plans, decommissioning timelines and any independently verified transition plan disclosure. UK insurers are increasingly willing to support credible transition stories provided the trajectory is verifiable.
A UK industrial group with 4% of revenue derived from a thermal coal transport contract applies for renewal of its £30 million combined liability programme. The lead Lloyd’s underwriter screens the activity and confirms it falls just below Lloyd’s 5% revenue threshold for the coal exclusion. The group’s published transition plan commits to exiting the contract by December 2027. The underwriter renews on standard terms with a warranty regarding non-renewal of the coal transport contract beyond the documented exit date and quarterly reporting of compliance.
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.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
Get a quote