Category: ESG fundamentals · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-10
ESG insurance underwriting is the process by which insurers integrate environmental, social and governance considerations into risk selection, pricing, terms and conditions, and capacity allocation decisions. The discipline has crystallised in the UK and Lloyd’s market since the publication of the Task Force on Climate-related Financial Disclosures Final Recommendations in June 2017 and Lloyd’s ESG strategy in December 2020.
Category: ESG fundamentals Also known as: sustainable underwriting, responsible underwriting, ESG-aligned underwriting Established / Date: Formalised in UK market c.2019–2021 Related concepts: ESG underwriting policy, ESG exclusion criteria insurance, ESG due diligence insurance
ESG insurance underwriting refers to the systematic embedding of environmental, social and governance factors within the underwriter’s risk assessment framework. It operates at two levels. At portfolio level, an insurer or syndicate establishes an ESG strategy specifying restricted activities, transition targets and engagement criteria. At individual risk level, underwriters apply specific ESG questions in the proposal process, request supporting documentation such as TCFD disclosures and modern slavery statements, and may impose loadings, sub-limits, warranties or exclusions reflecting ESG exposure.
The discipline draws on the UN Principles for Sustainable Insurance, launched at the Rio+20 Earth Summit in June 2012, which provide a four-principle framework for embedding ESG within insurance company decision-making [1]. In the UK, ESG underwriting practice is shaped by the PRA’s Supervisory Statement SS 3/19, the FCA’s ESG Sourcebook and Lloyd’s market-wide ESG strategy [2][3].
ESG underwriting is distinct from green insurance products. Green products (parametric weather covers, electric vehicle insurance, renewable energy property and casualty) are designed to insure low-carbon activities. ESG underwriting, by contrast, is a methodology applied across all classes of business.
UK regulatory expectations on ESG underwriting flow primarily from prudential supervision. PRA SS 3/19 of April 2019, updated July 2020, requires PRA-authorised insurers to embed climate-related financial risk across governance, risk management, scenario analysis and disclosure [2]. The Statement applies the proportionality principle but expects boards to hold accountability for the firm’s approach. The PRA’s Climate Biennial Exploratory Scenario, results published May 2022, tested participating insurers’ resilience to physical and transition risk pathways and informed subsequent supervisory dialogue.
The FCA’s expectations cover conduct-side ESG integration. Although primarily focused on asset management, the FCA ESG Sourcebook (introduced via PS21/24 and developed in PS23/16) sets disclosure and labelling standards that influence how insurer investment portfolios are presented [4]. The Senior Managers and Certification Regime allocates responsibility for ESG risk to identified Senior Management Functions, typically the Chief Risk Officer or Chief Underwriting Officer.
The Lloyd’s of London ESG strategy, published December 2020, set the most visible market-wide framework. The strategy required Lloyd’s managing agents to cease underwriting new thermal coal-fired power, thermal coal mines, oil sands and Arctic energy exploration risks from 1 January 2022, with full run-off of existing risks by 1 January 2030. Lloyd’s Market Bulletin Y5410 of November 2021 provided implementation guidance and confirmed the exclusion scope. Lloyd’s expects each managing agent to publish its own ESG strategy and to embed it within Solvency II governance arrangements.
Major UK composite insurers including Aviva, Legal & General, Zurich UK and AIG UK have published net-zero underwriting commitments. The Association of British Insurers’ Climate Change Roadmap of July 2021 set a 2050 net-zero underwriting and investment target [5]. The Net-Zero Insurance Alliance, launched in 2021, lost several large members in 2023 over antitrust concerns but the underlying methodologies, including the Partnership for Carbon Accounting Financials’ insurance-associated emissions standard published November 2022, remain in use.
UK businesses encounter ESG underwriting most visibly through expanded proposal forms. D&O liability questionnaires now routinely include 5 to 20 ESG questions covering climate transition planning, board diversity, modern slavery compliance, anti-bribery controls and material ESG litigation. Professional indemnity proposal forms for advisers (auditors, lawyers, consultants) increasingly probe ESG advice work and greenwashing exposure. Property and casualty proposals for industrial risks may require evidence of TCFD-aligned climate disclosure.
Premium impact varies by sector. Carbon-intensive industries face loadings of 10–30% or restricted capacity. Businesses with credible transition plans and verified ESG data may secure preferential terms, particularly in renewable energy and sustainable infrastructure segments.
A UK-listed mid-cap construction group applies for D&O insurance with £20 million limit. The London market underwriter reviews the group’s section 414CB climate disclosure, modern slavery statement, board composition (35% female, 20% ethnic minority) and a 2024 Employment Tribunal claim alleging whistleblower detriment in relation to environmental compliance reporting. The underwriter offers terms at a 7.5% premium uplift over prior year, applies a £2 million ESG litigation sub-limit and includes a warranty regarding continued publication of TCFD-aligned disclosures.
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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