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2022 Innovation Awards: ​D&O ESG Initiative

Posted On: Sep. 1, 2022 12:00 AM CST

2022 Innovation Awards

D&O ESG Initiative

Companies that show a willingness to build stronger frameworks to address environmental, social and governance issues could find potential rewards in enhanced directors and officers liability insurance as part of an initiative by Marsh LLC. 

Inspired by a business magazine article about companies that prioritized social concerns ahead of profits during the COVID-19 pandemic, Marsh was spurred to act, said Maureen Gorman, New York-based managing director in the broker’s FINPRO practice. “It got us thinking maybe there was a way for us to do something as an insurance broker to recognize our clients that were going above and beyond,” she said. 

That led Marsh to work with law firms and insurers to create the initiative that was launched last year to connect companies with outside advisers to help build or strengthen their ESG frameworks. Those companies that demonstrate a high level of commitment to managing ESG risks can be considered for preferred D&O policy terms and conditions from insurers that include American International Group Inc., Axis Capital Holdings Ltd., Berkshire Hathaway Specialty Insurance Co., Hartford Financial Services Group Inc., Liberty Mutual Insurance Co., Sompo International, Starr Insurance Cos. and Zurich North America. 

While potential policy enhancements vary, they include reduced retentions and more favorable D&O policy limits than those typically offered. 

“Firms that take the initiative to work with outside advisers, whether it’s to build or fortify the ESG frameworks they already have in place” are making themselves a “better risk” by potentially reducing the chances of litigation, Ms. Gorman said. “If they’re making that type of investment in time and money to do that, that’s a real positive.” 

Law firms including Norton Rose Fulbright LLP and Orrick, Herrington & Sutcliffe LLP advise Marsh clients as part of the initiative, offering such services as board of directors training and reviews of ESG disclosures that may help identify and correct weaknesses in ESG frameworks. 

Marsh makes the connection with the law firm but doesn’t pay for the services they provide. The insurers in the program may reward policyholders with lower costs because they become a better risk. 

Helping risk managers strengthen their ESG frameworks is not a one-size-fits-all process, Ms. Gorman said. 

“It’s a very bespoke process,” she said. “Depending on the client, they could be anywhere along the ESG journey. Some companies could be in the earlier stages,” while others may have a more mature risk management approach already in place.