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Japanese insurers to largely implement ESG, says Moody’s

Major Japanese insurers have unveiled plans to stringently adapt to ESG in processes such as underwriting

The reinsurance companies in Japan will aim to add environmental, social and governance (ESG) factors into decision making and strategy planning factors, media reports said. The report is produced by credit agency Moody’s.

However, there are small challenges for the reinsurers although the initiatives would boot them. The reports indicate that the adoption of ESG is a great move. The three major Japanese insurers have unveiled plans to stringently adapt to ESG in process such as underwriting.

The implementation of ESG will cut the insurer’s risk towards claim and reputation challenges that arise from legal and regulatory issues stemming from ESG.

The credit agency has indicated that Japanese market majors have been successful in handling the country’s environmental risks such as natural disasters. However, there are many hurdles to overcome.

Moody’s said that many Japanese P&C insurance companies hold major equities in Motor manufacturing companies, pushed by the country’s corporate practice of strategic equity investment.

The development shows that domestic insurers are heavily dependent upon the market’s largest business line- motor insurance. Furthermore, the fire insurance segment has been incurring losses the most and hasn’t been able to adapt towards low pricing and other changes such as fresh product specifications and premium rating system due to social constraints.

The reports indicate that tangible business benefits will not assist insurers unless they implement the new ESG underwriting to broader lines of business.

The global insurance sector has been walloped by the pandemic.

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