ESG is in insurers’ DNA

ESG (Environmental, Social, and Governance) is fast becoming one of the most important metrics by which investors, consumers, policymakers, and employees assess the obligations of businesses. The world has changed, and so have expectations of the private sector’s responsibility in the face of new and emerging issues—whether related to climate change, racial justice, or worker and consumer safety, among many others.

For many companies, this will mean reevaluating supply chains, reforming governance structures, and moving from paper to digital documents, among other activities. Insurers, for their part, are looking at these activities too.. In few industries are the incentives between the private sector and ESG best-practices as aligned as in insurance. ESG is more than just a “checking the box” exercise for insurers; the continued success—and in some cases, the continued survival—of the insurance industry depends on our collective ability to tackle the environmental, social, and governance issues of our time.

Insurers and climate risk

Perhaps the clearest example of the interconnectedness of insurers’ interests and society at large is climate change. There is no question that catastrophic natural events are becoming more common. Eight of the top ten costliest natural disasters in U.S. history came after the year 2000, with the other two coming in the 1990s. Average inflation-adjusted natural catastrophe losses rose from $5 billion annually in the 1980s to $35 billion each year in the 2010s. Overall losses from the 2020 Atlantic hurricane season alone totaled $43 billion, $26 billion of which were insured.  Insured catastrophe losses for 2020 altogether totaled $67 billion.

As the country’s financial first responders, insurers are not just responsible for providing relief to the communities affected by natural disasters, but also for planning for the potential catastrophes to come. The long-term resilience of both the communities impacted by disasters and of the industry itself depend on preparedness and improved risk-mitigation. Insurance has been looking at climate risk for decades, but insurers understand they need to plan and be prepared for a future that can and will see even more evolution. Insurers are moving from the historic posture of “detecting and repairing” to a more innovative stance of “predicting and preventing” This trend is helping both society and the industry’s business interests.

One way that insurers are preparing for this future is by keeping close eye on their policyholders’ surplus.  It is the amount of money remaining after an insurer’s liabilities are subtracted from its assets and acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation. The industry’s resilience is demonstrated by the fact that even through times of severe stress, such as the 2007-2009 recession and the COVID-19 pandemic, the industry-wide policyholders’ surplus has not fallen below the $400 billion mark, the minimum base line set forth by regulators . The industry has continually been able to meet its financial obligations—in fact, the industry’s cumulative policyholders’ surplus reached an all-time high of $914.3 billion in 2020.

The bottom line — ESG is in insurers’ DNA

In many ways, ESG is in insurers’ DNA. While there is always room for improvement, the industry has long been focused on the three pillars of Environmental, Social, and Governance.

— Environmental: Insurers are investing in order to ensure they have the financial wherewithal to keep promises and pay claims as climate risks evolve, and using data and analytics to model risk and protect communities. Insurers simply could not be in business if they failed to pay attention to the changing landscape.

Social: Insurers understand their unique position in society comes with added responsibilities. Close to three million Americans were employed by the insurance industry in 2019, with over $400 billion in claims paid that year alone. Insurers understand that fairness is a core expectation that stakeholders have of the industry, which is why they continually invest in making risk-based pricing models fairer and provide i consumers with premium relief when circumstances allow them to do so.. During the COVID-19 pandemic, for example, insurers provided over $14 billion in auto insurance premium relief to consumers as driving hours decreased. In addition, the industry has long supported non-profit organizations such as the Triple-I, the Insurance Institute for Business & Home Safety (IBHS), the Insurance Institute for Highway Safety (IIHS), and the Insurance Industry Charitable Foundation (IICF) to improve consumer safety and improve consumer understanding of insurance.

Governance: Insurance is a highly-regulated industry. In the US, insurers are overseen by over 50 regulatory jurisdictions. In addition, they must regularly self-audit and submit assessments of their current and future risk to regulators through the Own Risk and Solvency Assessment. A collaborative, multi-stakeholder approach between insurers and state-based regulators is necessary to ensure the continued resilience of the industry.


Washington State Commissioner’s Move Could Increase Rates, Agents Group Says

The Washington state Insurance Commissioner’s ban on insurer use of credit scoring could result in higher insurance costs for the state’s lower-risk policyholders, according to a recent editorial in The Daily Herald in Everett, Wash.

Written by the Professional Insurance Agents Western Alliance’s Executive Vice President, the editorial explores the unintended consequences of the Commissioner’s policy decision. In fact, Washington’s state lawmakers were unwilling to enact what the Commissioner imposed unilaterally.

Dr. Charles Nyce, Professor of Risk Management and Insurance at Florida State University, explained in a recent video the types of information insurers need to make sure lower-risk policyholders pay less for coverage, and vice versa. 


FAIR Video Series: Internalizing The Cost Of Risk For Social Good

Policyholders who pose lower risks to insurers generally benefit financially by paying lower premiums. Auto insurance is a perfect example, as drivers with a safe driving record are rewarded through lower prices.

That’s what incentivizes many policyholders to behave in a less risky manner. It’s also what some insurance experts call “internalizing the cost of risk for social good.”

The Future of American Risk & Insurance (FAIR) is bringing clarity to the subject of risk-based pricing in an ongoing educational video series. 

In this segment, Dr. Charles Nyce, Florida State University Associate Professor of Risk Management and Insurance, explains how restricting insurer use of either certain risk characteristics or rating variables when pricing policies carries the risk of reducing some of the social good that insurance provides.


FAIR Video Series: How Insurance Pricing Works

The Future of American Risk & Insurance (FAIR) is taking our subscribers back to school this week to understand how lower-risk policyholders subsidize higher-risk policyholders in markets where the risk-based pricing of insurance products is either discouraged or disallowed.

In this initial segment of what will be a FAIR video series, Dr. Charles Nyce of Florida State University (FSU) explains how insurers’ rigorous data analysis allows them to understand the risks they are assuming on behalf of a policyholder and then price accurately the policies insurers sell. Both criteria must be met for risk-based pricing to exist.

Given the close regulatory scrutiny insurers face, the cost of insurance policies in the U.S. are neither excessive, inadequate, or unfairly discriminatory, he notes, while stressing risk-based pricing is essential to make sure lower-risk policyholders pay less.

Dr. Nyce is FSU’s Tallahassee, Fla.-based Robert L. Atkins Associate Professor of Risk Management and Insurance. In addition, he is the Associate Director for the Center for Risk Management Education and Research in the Department of Risk Management/Insurance, Real Estate and Legal Studies at Florida State University’s College of Business.

The video segment can be accessed below. For more information and resources, visit


Triple-I Launches FAIR 2.0

Good afternoon,

Building upon the success of its Future of American Insurance & Reinsurance (FAIR) campaign, the Insurance Information Institute (Triple-I) is unveiling today an updated FAIR 2.0 website.

The website’s address remains the same——yet its future content will be expanding to other topical issues beyond pandemic-related business income (interruption) insurance matters.

To start, FAIR 2.0 will now address growing interest surrounding risk-based pricing of insurance products with educational resources such as fact sheets and blog posts, in addition to longer white papers.

In the coming months, the Triple-I will subsequently expand FAIR 2.0’s website to include the latest news on insurer Environmental, Social, and Governance (ESG) initiatives and human-centered innovation.

The pandemic gave rise to the Triple-I’s FAIR campaign, but the insurance industry’s essential role in the U.S. economy is always evolving and we want to continue to be a resource to media, policymakers, and broader industry stakeholders.

FAIR 2.0 will tell that story.

Sean Kevelighan
President and Chief Executive Officer
Insurance Information Institute


California Judge Rules In Favor of Insurer, Upholding Policy’s Virus Exclusion

This week in California, U.S. District Magistrate Judge Jacqueline Scott Corley ruled in favor of the insurance industry in a lawsuit on pandemic-related business interruption (BI) claims—filed by attorneys representing two Napa Valley-based French restaurants—on the basis that the virus exclusion precludes coverage for losses caused by the COVID-19 pandemic.
“While the court acknowledges the havoc that the COVID-19 pandemic and consequent shelter-in-place orders have caused businesses throughout this country and the world, the court cannot read an ambiguity into an insurance contract where none exists,” Judge Corley said.
This California ruling adds to the growing list of favorable rulings over the last year affirming insurers’ position that global pandemic risks are uninsurable. Insurers are doing what they can in response to the pandemic, including providing premium rebates, policy extensions, and making charitable donations, as they work to keep their promises to policyholders for covered losses.
The full article is available here. For more information and resources, visit


A Growing List Of Court Decisions Affirms The Necessity Of Direct Physical Damage For Business Interruption Insurance

Business interruption (BI) policies are not designed to cover pandemics and necessitate a direct physical loss to property to be activated. As such, the widespread litigation against insurers, attempting to alter BI policies to cover pandemic-related income losses, is a misguided effort that places the interests of attorneys ahead of business owners’.

To date, there has been an increasing number of court rulings affirming insurers’ position:

  • U.S. District Court for the Northern District of California: “A California magistrate judge on Tuesday dished out a dismissal in famed California [policyholder]’s suit seeking coverage for pandemic-related government shutdown orders, saying a virus exclusion precludes coverage for economic losses caused by COVID-19.”
  • U.S. District Court for the Southern District of Indiana: “An Indiana federal judge on Monday ruled that [policyholder] is not entitled to coverage for pandemic-related business interruption losses, finding that a clear virus exclusion in the [policyholder’s] policies forecloses their insurance claims.” (Law360, 3/8/21)
  • U.S. District Court in Cleveland: “‘This case turns on the meaning of the language ‘physical loss of or damage to’ property in the insurance policies,‘ Travelers wrote, but does not define the terms, the ruling said.” (Business Insurance, 2/19/21)
  • Civil District Court for the Parish of Orleans: “A New Orleans judge denied a motion for declaratory judgment that insurance coverage is owed to a restaurant for business income that was lost when it was required to close its dining room because of the COVID-19 pandemic.” (Claims Journal, 2/17/21)
  • U.S. District Court for the Southern District of Florida: “The plaintiff alleged that COVID-19 was ‘present’ at the insured properties on a particular date, but Chief Judge K. Michael Moore held that this allegation was insufficient to state a claim for coverage and granted the insurer’s motion to dismiss with prejudice.” (JD Supra, 1/25/21)
  • U.S. District Court for the Southern District of Florida: “Judge Robert N. Scola Jr. found that these allegations failed to state a claim for coverage under the policy’s business income coverage provision, which required ‘direct physical loss of or damage to’ the insured property to trigger coverage.” (JD Supra, 1/25/21)
  • U.S. District Court for the Western District of Pennsylvania: “A federal judge on Friday tossed [plaintiff’s] proposed class action seeking coverage from [insurer] for losses due to the coronavirus, finding that establishments limited to carry-out service had not sustained the ‘direct, physical loss‘ necessary to trigger their insurance policies.” (Law360, 1/15/21)
  • U.S. District Court for the Southern District of Mississippi: “A Hattiesburg, Mississippi, restaurant became the latest plaintiff to be denied COVID-19-related business interruption coverage by an insurer, when a federal district court ruled Wednesday there was no physical damage under the terms of its policy and that there was also no coverage because of a virus exclusion.” (Business Insurance, 11/5)
  • U.S. District for the Middle District of Florida: “The judge rejected [policyholder’s] argument that economic damage is synonymous with physical loss. ‘Plaintiff’s argument is unpersuasive because Florida law and the plain language of the policies reflect that actual, concrete damage is necessary,’ he said.” (WestLaw Today, 9/29)
  • U.S. District Court for the Northern District of California: “Judge Tigar wrote that because the government shutdown orders were preventative in nature — seeking to prevent the spread of the virus — that lends credence to [insurer’s] argument that they were not issued in response to physical loss or damage.” (Law360, 9/14)
  • U.S. District Court for the Southern District of California: “‘Plaintiffs are not the first policyholders to argue in court that government orders forcing their businesses to stop operating as a result of the COVID-19 pandemic trigger insurance under provisions similar or identical to the ones in the Policy here. Most courts have rejected these claims, finding that the government orders did not constitute direct physical loss or damage to property,’ Judge Bencivengo said in a ruling for [insurer].” (Business Insurance, 9/14)
  • U.S. District Court for the Eastern District of Michigan: The policy only covers lost income in the event of physical damage to a property, and even if that were not the case, the virus exclusion in the policy would bar pandemic-related coverage, the judge ruled. The ruling adds to the growing list of insurer wins on the issue of business interruption coverage for coronavirus-related losses.”  (Business Insurance, 9/4)
  • U.S. District Court for the Middle District of Florida: “Because [the plaintiff’s] damages resulted from COVID-19, which is clearly a virus, neither the Governor’s executive order narrowing dental services to only emergency procedures nor the disinfection of the dental office of the virus is a ‘Covered Cause of Loss’ under the plain language of the policy’s exclusion,’ the ruling states.” (Business Insider, 9/3)
  • U.S. District Court for the Central District of California: “‘An insured cannot recover by attempting to artfully plead impairment to economically valuable use of property as physical loss or damage to property,’ Wilson said, adding that [the plaintiff] has only plausibly alleged that in-person dining restrictions interfered with the use or value of its property — ‘not that the restrictions caused direct physical loss or damage.'” (Law360, 8/28)
  • U.S. District Court for the Western District of Texas: “In so ruling, Judge Ezra indicated that ‘while there is no doubt that the COVID-19 crisis severely affected Plaintiffs’ businesses, [insurer] cannot be held liable to pay business interruption insurance on these claims as there was no direct physical loss, and even if there were direct physical loss, the Virus Exclusion applies to bar Plaintiffs’ claims.'” (The National Law Review, 8/25)
  • District of Columbia Superior Court: “The judge found the plaintiffs offered no evidence that the virus was present in their inured properties and found that the mayor’s orders did not have any material or tangible effect on the insured’s properties.” (Insurance Journal, 8/7)
  • Michigan’s Ingham County 30th Judicial Circuit Court: “The court said that [the plaintiffs’] argument was ‘just simply nonsense, and it comes nowhere close to meeting the requirement that there has to be some physical alteration to or physical damage or tangible damage to the integrity of the building.'”  (JD Supra, 7/17)
  • Southern District Court of Florida & Eleventh Circuit Court: “Based on the Eleventh Circuit’s analysis, coverage will not be triggered for similar claims because the presence of the COVID-19 virus, or cleaning related to the virus, does not constitute direct physical loss or damage to property. The Eleventh Circuit’s holding provides helpful guidance that will most certainly be used in the analysis of COVID-19 business interruption claims.” (JD Supra, 7/21)

As highlighted in FAIR’s one-minute explainer video below, trial attorneys’ attempts to retroactively include the uninsurable pandemic risk in business interruption insurance contracts is detrimental to policyholders, communities, insurers, and economic growth. Insurers are doing what they can in response to the pandemic, as they work to keep their promises to policyholders for covered catastrophe losses such as hurricane damage.

For more information and resources, visit


Houghtaling Loses BI Coverage Claim

A New Orleans judge has denied a motion that would have forced an insurer to pay a business interruption (BI) claim to a restaurant closed because of COVID-19.

The case is particularly significant because it was the first known legal action filed against insurers over COVID-19 and BI. 

The motion, brought by well known class action attorney John Houghtaling II, joins a pool of nationwide rulings that have been overwhelmingly decided in favor of insurers. As in many similar cases, the ruling came down to the physical damage requirement present in most BI policies.

From Claims Journal:

Attorneys who represent insurers laid the groundwork to deny virus-related business-interruption claims early on. They argued that coverage is not triggered under commercial property policies without some tangible physical alteration to the insured property.

State and federal judges around the country have ruled in favor of insurers in motions to dismiss or for summary judgment in about four cases out of five so far.

For more information and resources, go to


Business Interruption Litigation Remains Unsuccessful In Florida

Attempts to force insurers to pay uncovered pandemic-related business interruption claims remain unsuccessful in Florida, as described by a recent article in Florida’s Business Observer:

  • “Out of 29 rulings or resolutions so far in Florida, insurance firms have won all 29 cases, according to the national Covid Coverage Litigation Tracker, a University of Pennsylvania Carey Law School project.”

Quoting the Triple-I’s Mark Friedlander, the piece notes these lawsuits have failed because most policies contain virus exclusions or require physical damage to trigger a business interruption claim:

  • “Industry officials say insurers have been prevailing in these cases for the simple reason that policy language doesn’t cover a pandemic-driven business shutdown. Also, about  80% of business interruption policies in the U.S. have virus exclusions, says Mark Friedlander, a spokesman for the Insurance Information Institute, a pro-insurance industry group.”

To read the full piece from Business Observer, click here.


Allianz Risk Barometer: A “Covid Trio” Of Risks Will Continue To Drive Disruption In 2021

Allianz Global Corporate & Specialty (AGCS) conducts annual research on the views of 2,769 industry experts in 92 countries and territories, including CEOs, risk managers, brokers, and insurance experts. The 2021 Allianz Risk Barometer identified the “Covid Trio”—business interruption, pandemic outbreaks, and cyber incidents—as 2021’s major business risks:

  • Business interruption. Although Covid-19 emerged as the dominant risk last year, it only added to multiple other concerns for business interruption. This is the 8th time that business interruption has fallen as the top risk for the annual Allianz Risk Barometer report. More traditional business interruption risks like natural catastrophes, extreme weather, and fire, remain major threats for business interruption across many industries. Additionally, there is growing awareness of other risks such as political instability, violence, and terrorism. 
  • Pandemic outbreaks. The 2020 Covid-19 global outbreak demonstrated that business interruption events on an extreme, global scale are real possibilities. According to expert Philip Beblo of AGCS’s global property underwriting team, “The consequences of the pandemic—wider digitalization, more remote working and the growing reliance on technology of businesses and societies—will likely heighten BI risks in coming years.”
  • Cyber incidents. The world recently accelerated its trend toward remote work and digitalization as a result of the need to stay at home during the pandemic. The FBI reported that during the first wave of lockdowns in April 2020, cybercrime incidents increased by 300%. Cybercrime is estimated to cost the global economy more than $1 trillion, which is a 50% increase from two years ago. For several countries, including Brazil, France, India, Japan, and the U.S., cyber incidents are a top three risk.

The report notes that building greater resilience in business models will be key to mitigating future disruption. 

Although it’s a new year, Covid-19 and its effects are not yet in the rearview mirror. American businesses are still struggling. Policymakers have not yet executed a viable, sustainable, and inclusive government-backed solution to provide relief for the COVID-19 business interruption crisis, or established a solution for the inevitable crises of a similar caliber in our future. As the 2021 Allianz Risk Barometer indicates, the pandemic and business interruption concerns are too important for stability to dismiss. It’s essential that policymakers prioritize building resilience in 2021, and a necessary first step is a federal backstop for this pandemic and for future ones.

You can read the full report on 2021’s major business risks here.