Abstract
Insurers act as institutional investors and underwriters of risk. Therefore, improving their environmental, social, and governance (ESG) performance is important for the transmission of ESG values to all economic sectors. We analyze ESG scores of worldwide Property and Casualty (P&C) insurers during 2013–2022 and show that more sustainable insurers have high operating leverage despite appearing to be financially stable from their combined ratios and z-scores. Additional results for the US subsample illustrate that stocks issued by sustainable insurers deliver positive excess returns. Overall, these findings suggest that there is a significant association between sustainable practices and the ability of insurers to execute business and create value. This is important for insurance managers, investors, and policy makers, as insurers play a prominent role in promoting economic growth and stability.
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