Category: ESG fundamentals · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-10
ESG screening in insurance is the structured filtering of proposed and bound risks against environmental, social and governance criteria, used by UK insurers and Lloyd’s managing agents to determine eligibility for capacity, capacity allocation and pricing. It operates at the earlier stages of the underwriting workflow than full ESG due diligence and is generally rule-based.
Category: ESG fundamentals Also known as: sustainability screening underwriting, ESG negative screening, ESG positive screening Established / Date: Embedded in UK market practice 2021–2022 following Lloyd’s ESG strategy Related concepts: ESG exclusion criteria insurance, ESG due diligence insurance, ESG underwriting policy
ESG screening is a rule-based filtering process applied to proposed and renewal risks against defined ESG criteria. Two principal screening approaches are used. Negative screening excludes risks that meet specified disqualifying criteria, for example revenue thresholds for thermal coal, oil sands, controversial weapons or tobacco. Positive screening identifies risks that meet specified favourable criteria, for example renewable energy, sustainable infrastructure or B Corp certified entities, which may then qualify for preferential facilities or pricing.
A third hybrid approach, sometimes called norms-based or best-in-class screening, filters risks against international norms (UN Global Compact principles, OECD Guidelines for Multinational Enterprises) or selects the better-performing risks within high-impact sectors. These approaches are informed by the UN Principles for Sustainable Insurance (June 2012) [1] and increasingly by industry-specific frameworks such as the Equator Principles (for project finance), although the Equator Principles primarily apply to lenders rather than insurers.
ESG screening is conceptually distinct from sanctions and financial crime screening, although in practice some insurers integrate the workflows.
ESG screening is not directly mandated by UK statute. Its principal regulatory drivers are prudential. The PRA’s SS 3/19 of April 2019, updated July 2020, requires PRA-authorised insurers to embed climate-related financial risks across underwriting, including through screening of high-exposure sectors [2]. The Lloyd’s market-wide screening framework derives from the Lloyd’s ESG strategy of December 2020 and Market Bulletin Y5410 of November 2021 [3], which prohibits managing agents from underwriting new thermal coal-fired power, thermal coal mines, oil sands or Arctic energy exploration risks from 1 January 2022 and from existing risks by 1 January 2030.
Sanctions screening operates as a parallel mandatory regime under the Sanctions and Anti-Money Laundering Act 2018 and the Office of Financial Sanctions Implementation’s published lists. While distinct from ESG screening, some governance-pillar ESG criteria (sanctions evasion, money laundering, corruption) overlap with mandatory financial crime screening.
UK composite insurers and Lloyd’s managing agents apply ESG screening through documented underwriting policies. Negative screening criteria typically include revenue thresholds (often 5% or 10%) for prohibited activities such as thermal coal mining, coal-fired power generation, oil sands extraction, Arctic offshore energy and controversial weapons manufacture (cluster munitions and anti-personnel mines, regulated separately under the Cluster Munitions (Prohibitions) Act 2010 and the Land Mines Act 1998). Some insurers extend screening to tobacco, gambling, adult entertainment and recreational cannabis.
Positive screening facilities have been established at Lloyd’s and in the UK company market for renewable energy, energy storage, sustainable mobility and certified sustainable agriculture. These facilities may offer broader terms, follow-form participation or preferential pricing for qualifying risks. The ABI Climate Change Roadmap of July 2021 explicitly encouraged the development of such facilities to support the UK’s net-zero transition [4].
UK businesses falling within Lloyd’s prohibited activity definitions face binary capacity loss in the Lloyd’s market, requiring placement in alternative international markets or self-insurance solutions. Businesses with mixed-activity revenue streams, where prohibited activity falls below the relevant threshold, can usually secure cover but should expect detailed revenue breakdown questions in the proposal form.
Businesses in positive-screening categories should highlight relevant certifications (B Corp, ISO 14001, BREEAM, FSC, MSC, Fairtrade) in submissions, as they may unlock access to preferential facilities and demonstrate ESG credibility supporting D&O and PI underwriting.
A UK aggregates and quarrying group applies for its £20 million combined property and liability programme. The lead Lloyd’s underwriter screens the risk and confirms that the group’s revenue mix (no thermal coal, no oil sands) falls outside Lloyd’s prohibited activity definitions. The underwriter then applies positive screening criteria for the group’s two operational solar PV installations, recognising them within a preferential renewable energy facility. The overall placement proceeds at terms with a 5% credit on the property element reflecting the renewable energy component.
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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