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Aon Lists How Captives Can Drive Positive ESG Results

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Aon Lists How Captives Can Drive Positive ESG Results

Aon Lists How Captives Can Drive Positive ESG Results

Aon Lists How Captives Can Drive Positive ESG Results

According to a recent Aon analysis, captive owners can handle ESG risks and possibilities by using a captive insurance firm, as well as by following the UN Environment Program’s Principles for Sustainable Insurance.

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Despite differences in the traditional definition of a captive, Aon claims that all types of captives can generally view ESG concerns at an organization more acutely than a regular insurer.

According to Aon, a captive’s status as the parent’s expert underwriter is another significant component of the role it plays in the larger sustainability conversation.

The firm suggests that a captive having its portfolio limited to the parent organization gives its underwriters a closer look at the specific actions taking place at the business unit level within the parent.

Aon Lists How Captives Can Drive Positive ESG Results

This allows underwriters to mitigate ESG risks and promote sustainability, says Aon, while traditional insurers typically rely on disclosures, ESG rating agencies, and other assessments across entire economic sectors or lines of business.

Aon adds that by using the captive as a means to apply underwriting discipline on the risks, a parent organization can typically develop a better understanding of the underlying characteristics of the risk and begin the process of building a means to manage the inherent volatility through the application of insurance accounting principles, while also improving risk management and reporting practices.

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Butch Bacani, Program Leader for the UN Environment Program’s PSI, writes, “Given their unique structure, captive insurers have a key role to play in addressing environmental, social and governance (ESG) issues—such as climate change, nature and biodiversity loss, pollution and waste, and human rights—and in achieving a positive impact in both the insurance industry and the broader economy.

“The role of captives in tackling sustainability challenges is, however, not well-understood and is a largely untapped opportunity. This report is timely because it captures how captives can develop and implement sustainability best practices across their risk management, insurance, and investment activities.”

Aon Lists How Captives Can Drive Positive ESG Results

The PSI serves as a global framework for the insurance industry to address ESG risks and opportunities—and a global initiative to strengthen the insurance industry’s contribution as risk managers, insurers, and investors to building resilient, inclusive, and sustainable communities and economies on a healthy planet.

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The initiative was launched in 2012, and since its inception, more than 220 organizations have joined, including insurers representing about one-third of world premiums and $15 trillion in assets under management, and the most extensive global network of insurance and stakeholder organizations committed to addressing sustainability challenges.


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