Climate events, shifting regulations, and rising investor expectations are reshaping the insurance industry much faster than many leaders expected. Underwriting used to rely on long histories of loss data. Now, physical and transition risks are changing so quickly that past patterns don’t tell the whole story. Climate disclosures are under closer scrutiny, and investors want to know how insurers are planning for long-term exposure. At the same time, clients are asking for products that reflect new environmental and social realities.
Environmental, social, and governance (ESG) factors now influence how insurers price risk, build portfolios, and make strategic decisions. The industry is moving toward a more integrated way of working that looks far beyond short-term performance. This shift is helping insurers better understand their exposure, communicate more clearly, and respond faster to emerging risks.
The companies that embrace ESG early are already seeing the benefits. They’re improving how they model risk, adapting to shifting markets, and earning trust by being transparent about what they’re learning and how they’re planning. That’s becoming a meaningful advantage.
Understanding ESG and its relevance in insurance
ESG factors shape almost every part of the insurance business. Environmental risks affect underwriting and claims. Social issues influence customer relationships and product design. Governance practices guide everything from strategy to disclosure.
Environmental considerations include physical climate risks, transition risks tied to decarbonization, and how environmental issues influence both claims and investments. This is where insurers feel the impact of severe storms, wildfires, rising sea levels, and shifting energy markets.
Social considerations reflect how insurers support customers and communities, offer fair and accessible products, and create inclusive workplaces. These factors influence trust, reputation, and long-term loyalty.
Governance brings it all together. It shapes decision-making, oversight, and transparency. Strong governance helps leaders make sense of complex information, stay aligned on priorities, and communicate clearly with stakeholders.
ESG has become central to insurance strategy because the industry is so closely tied to climate and financial risk. Integrating ESG helps insurers understand long-term trends, stay aligned with investor expectations, and keep pace with regulatory change. It’s also becoming a differentiator. Insurers that take ESG seriously can spot risks earlier, explore new market opportunities, and tell a more compelling story about long-term resilience.
The environmental dimension: Climate risk and underwriting
How climate change is rewriting risk models
Climate change is making weather-related losses more frequent and more severe. Munich Re has calculated that natural disaster losses from 1980-2024 total USD 6.9 trillion — and approximately 67% of these losses were not insured. The Swiss Re Institute reports that global insured natural catastrophe losses exceeded USD 137 billion in 2024.
These rising losses are pushing insurers to rethink how they assess and price risk. Historical data is still useful, but it no longer paints a full picture. Insurers are now using climate scenario analysis to understand how hazards may intensify under different warming pathways. This helps them see how losses could accumulate over time, how regional exposure might shift, and where pricing or coverage strategies need to evolve.
Forward-looking data also helps insurers stay aligned with regulatory expectations. Supervisors in North America and Europe want to see how insurers model climate risks and integrate them into strategy. Yet many insurers are still working through significant gaps. Manifest Climate’s review of US insurer disclosures found progress, but also a clear need for more consistent climate information and stronger governance practices.
Insurers that invest in better models can price risk more accurately, understand how exposures interact, and make more confident decisions about capital.
Transition risks and portfolio exposure
Insurers also face transition risks across their investment portfolios as economies move toward lower-carbon systems. Policy changes, new technologies, and shifting market expectations can affect the value of carbon-intensive assets. These shifts often arrive faster than expected.
Investment portfolios are a major source of financial exposure. As high-emitting sectors face new regulations and rising costs, insurers with concentrated holdings may experience volatility or long-term value erosion.
ESG tools help insurers understand where those risks sit and how to manage them. They can show which assets face potential pressure, how portfolio emissions compare to market benchmarks, and what different climate scenarios mean for long-term returns.
This work is becoming increasingly important. Research by Ceres—a Manifest Climate client that uses our AI engine for industry analysis—shows that many insurers still struggle to measure climate exposure in a consistent way. Better data makes it easier to shift capital, engage with companies, and build strategies that hold up under net-zero pathways.
The social and governance dimensions: Beyond climate change
Governance, transparency, and accountability
Governance shapes how insurers make decisions and follow through on them. When it’s done well, it brings clarity to complex questions, helps teams stay honest about what the data shows, and creates a shared understanding of where the company is heading. It also gives boards and executives the structure they need to oversee climate and sustainability risks in a practical, grounded way.
Transparent governance builds trust. It shows stakeholders that the insurer is paying attention, acting on real evidence, and working toward disclosures that reflect genuine progress rather than vague commitments.
Frameworks like the Task Force on Climate-related Financial Disclosures and the International Sustainability Standards Board help insurers bring structure to this work. They guide how companies talk about risks, how they integrate ESG into strategy, and how they explain decisions to investors, regulators, and customers.
Equity and access
Social considerations are becoming more central to insurance strategy. Insurers are taking a closer look at how well their products serve different communities, especially those facing higher climate risks or limited access to coverage. They’re also looking at how their claims processes support people when they need help most.
Internally, social factors influence how insurers attract and retain talent. Employees want to work for companies that show strong values, create inclusive workplaces, and invest in community resilience. These expectations shape culture and reputation in ways that matter for long-term success.
Customers, regulators, and investors pay close attention to how insurers manage social impact. Clear action in this area builds goodwill and helps differentiate insurers in a competitive landscape.
ESG challenges in the insurance industry (and how to overcome them)
Integrating ESG into insurance is not simple. Data comes from many sources and often lacks consistency. Metrics vary between frameworks. Internal teams may not have the experience or capacity to interpret ESG information while juggling day-to-day responsibilities.
At the same time, regulatory expectations continue to grow. Insurers must keep up with evolving rules, including the EU taxonomy, proposed US Securities and Exchange Commission climate disclosure requirements, and guidance from the Office of the Superintendent of Financial Institutions in Canada. These expectations push insurers to demonstrate how they identify, measure, and respond to climate risks across their business.
Even with these challenges, insurers have a chance to modernize systems that haven’t kept pace with today’s risks. Cross-functional collaboration, better data infrastructure, and clearer governance can make ESG integration far easier.
Technology supports this shift. AI tools help insurers gather information faster, compare performance to peers, and interpret complex frameworks without overwhelming teams. With better visibility, insurers can focus on strategic decisions rather than manual research.
How ESG is transforming risk management practices
ESG factors are now part of every stage of risk management. Insurers use climate and sustainability insights to identify emerging risks, assess exposure, and strengthen long-term planning.
Scenario analysis helps insurers understand how different climate futures could affect portfolios, claims, and capital needs. Stress testing reveals where vulnerabilities may appear under policy or market shifts. These tools help insurers refine strategy and communicate clearly with regulators and investors.
ESG data also supports more proactive underwriting. When insurers understand how physical and transition risks vary by sector or region, they can adjust pricing, refine product offerings, and explore new markets with more confidence.
Portfolio diversification strategies are also changing. Insurers are gradually moving capital toward businesses that show stronger resilience under net-zero pathways.
Across all of this, clear ESG reporting has become essential for insurers. Disclosures help insurers explain how they’re managing risk, how they’re improving performance, and how they’re preparing for a changing climate.
Access to reliable ESG intelligence gives insurers a more complete and forward-looking view of their business. It helps them make decisions that hold up over time and stay ahead of emerging risks.
Harness ESG intelligence with Manifest Climate
ESG integration is reshaping how insurers approach risk and long-term planning. The industry is shifting from a backward-looking model to one that anticipates what lies ahead. With better insights, insurers can price risk more accurately, create stronger portfolios, and communicate a clearer strategy to stakeholders.
Manifest Climate makes this work easier. The platform helps insurers assess their ESG maturity, benchmark against peers, and understand where they stand in relation to global best practices. It turns complex frameworks into clear guidance that teams can use without weeks of manual research.
One insurer used Manifest Climate to surface hidden risks, strengthen governance, and improve communication across teams. This work gave them a clearer view of how climate and ESG factors influence underwriting and investment decisions, and helped them build a more resilient long-term strategy.
Manifest Climate helps insurers make sense of ESG data, sharpen disclosures, and build confidence in their approach to climate risk. It gives teams a foundation they can trust as they plan for the future.
If you want to see how ESG intelligence can support your strategy and help you build long-term resilience, book a demo.
