KBRA Releases Research – Insurance: KBRA’s Framework for Incorporating ESG Risk Management in Credit Ratings

Kroll Bond Rating Agency (KBRA) releases research on our approach to incorporating environmental, social, and governance (ESG) factors in the credit rating process for (re)insurance companies.

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Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Thursday, September 23, 2021
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Professional Services, Insurance, Finance, Research, Insurance, Weather, KBRA, Bond, ESG, Risk management
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NEW YORK, United States
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Summary
Key Points: 
  • Kroll Bond Rating Agency (KBRA) releases research on our approach to incorporating environmental, social, and governance (ESG) factors in the credit rating process for (re)insurance companies.
  • The diversity of organizational structures, regulatory regimes, liability exposures, and distribution channels across the (re)insurance industry will likely translate into a range of ESG touchpoints that vary widely by sector and market.
  • Consistent with our overall rating framework, KBRA will consider the credit impact of ESG factors within the unique business context of each (re)insurer.
  • For social factors, KBRA will focus on how management has identified its stakeholders, assessed potentially competing interests, and calibrated its approach within the context of the (re)insurers overall corporate strategy.


Kroll Bond Rating Agency (KBRA) releases research on our approach to incorporating environmental, social, and governance (ESG) factors in the credit rating process for (re)insurance companies.

Key Takeaways

  • The diversity of organizational structures, regulatory regimes, liability exposures, and distribution channels across the (re)insurance industry will likely translate into a range of ESG touchpoints that vary widely by sector and market. Consistent with our overall rating framework, KBRA will consider the credit impact of ESG factors within the unique business context of each (re)insurer.
  • When analyzing climate risk for insurance companies, we consider climate-related exposure, including exposure to physical risks like sea-level rise, drought, and other extreme weather events, as well as transition risks, which are indirect and relate to an entity’s ability to adjust to a changing regulatory environment along with changes in overall insurance market dynamics.
  • For social factors, KBRA will focus on how management has identified its stakeholders, assessed potentially competing interests, and calibrated its approach within the context of the (re)insurer’s overall corporate strategy.
  • KBRA’s rating process for (re)insurers will continue to incorporate an assessment of governance structures and their appropriateness relative to the size and complexity of the entity but will also include a specific line of inquiry to highlight explicit strategies or programs to address ESG issues, with a particular emphasis on cybersecurity.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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