How should insurers choose their CSOs?

What might qualify someone to become chief sustainability officer for an insurance company/?

It turns out this relatively new C-Suite position is drawing candidates with an array of backgrounds who then work in a wide range of organizational structures.

Indeed, while more insurers are adding CSOs or their equivalent, there doesn’t appear to be any common template among those being hired to help coordinate insurer responses to environmental, social and governance (ESG) challenges.

Research published during the summer of 2021 by the Deloitte Center for Financial Services examined hurdles that many recently appointed CSOs face in terms of staff, resources and authority, while offering suggestions on how insurers might empower them. Findings and recommendations were supported by interviews with a dozen individuals presenting diverse resumés.

One point often cited by interviewees that might help explain the absence of a cookie-cutter job description is the broad “to do” list facing insurer CSOs. These leaders are usually called upon to address climate risk and diversity/equity/inclusion (DEI) issues as well as the calls for greater transparency and accountability in corporate governance. Each of these is a very distinct area likely to call for different approaches and capabilities.

Organizational structures also varied widely. Only one of the CSOs interviewed reported directly to the CEO, while another was part of the CFO’s team. The rest were overseen by lesser but well-established leadership positions — including the general counsel, chief compliance officer or chief administration officer. Some answered to those in relatively new positions of their own, such as a chief governance officer.

Who are insurers hiring to fill the CSO role?

The origin stories of the CSOs interviewed for this research ran the gamut but tended to fall in one of three general categories:

• Legal affairs. This is perhaps the most obvious source of CSOs, since there is typically a major compliance component to ESG initiatives. That’s because many state, federal, and global regulators are seeking more information and documented action from insurers about how they’re managing climate exposures, enhancing diversity in leadership, improving access to underserved markets or reorganizing their governance structure.

One personal lines carrier moved its former chief legal officer into the new CSO post, mainly because in their prior role they had routinely attended hundreds of calls with C-Suite executives, directors, and investors, and helped coordinate the company’s responses to regulatory and legal challenges. A multiline insurer hired an attorney who spent years as a litigator advising corporate management and boards on securities law and corporate governance.

• Human resources. This is also a logical part of the candidate pool, with a few interviewees having already become specialists in dealing with diversity and inclusion issues while managing recruitment, hiring, supervision, and promotion protocols.
• Communications. Messaging is another major aspect of a CSO’s job — getting the word out about how an insurer is responding to ESG challenges, offering data to demonstrate progress, and explaining sustainability strategies, benchmarks, and goals to stakeholders. One life insurer hired a communications specialist as CSO who had also spent time handling public relations in government affairs. Another multiline CSO had been moved over from communications on corporate citizenship, thought leadership and issues management.

Who should insurers consider hiring for CSO?

This research indicates that the CSO position is still very much a work in progress. For now, there may not be many candidates with wide enough professional backgrounds to have experience dealing with the plethora of concerns under ESG’s umbrella. This presents some difficult questions in hiring decisions. For example:

• Could or should someone with a climate risk background handle DEI issues, or vice versa?
• Would a legal expert conversant in regulatory compliance and governance be able to oversee the science and verifiability of climate risk modeling and mitigation?
• Can a communications specialist not just report on what an insurer is doing, but go beyond data gathering and messaging responsibilities to create and lead more action-oriented initiatives across the ESG spectrum?

At some point having a relatively new educational degree—a Master’s in Sustainability— may become increasingly common or even table stakes for CSO candidates as the field matures. Yet for the moment there probably aren’t many unicorns out there with deep expertise in all ESG fields. That means insurers will likely need more than one individual to share the job, or at least enable their CSO to delegate some duties to those with specific experience in either “E,” “S,” or “G.”

One commercial insurer interviewed, for example, appointed a group head of sustainability to oversee the company’s entire ESG effort. While personally handling stakeholder management and corporate reporting, this individual also brought three other specialists on board to partner with the group head—one for climate risk (focusing on modeling, portfolio management, underwriting, pricing, and risk management), one dedicated to ESG-targeted investment issues, as well as one devoted to diversity and inclusion efforts.

Deloitte’s research findings indicate that no matter who assumes this relatively new CSO role, they are likely to have their hands full establishing themselves and tapping into the wide variety of functions and individuals they will encounter as they collect data, track progress, and determine how they might be most effective in spurring action.

For that reason, one commercial insurer interviewed noted that regardless of a candidate’s primary field of expertise, a CSO’s primary job should be to “herd the cats” — hired based on their general business acumen as well as demonstrated ability to strategize, influence behavior, encourage collaboration, and coordinate ESG initiatives and goals across the organization.

The development of this emerging yet high-profile discipline can help determine which types of individuals are likely to make the most of these opportunities to help insurers become more socially conscious corporate citizens, as well as better positioned to succeed in an increasingly sustainability-focused market.

For more information, download Deloitte’s full research report on “Building a more sustainable insurance industry: How carriers can empower CSOs to tackle climate risk, diversity and inclusion, and governance transformation.” Also see Sam Friedman’s prior NU PropertyCasualty360 article summarizing the main takeaways and recommendations from Deloitte’s CSO research.

Former NU Property & Casualty Editor in Chief Sam J. Friedman (samfriedman@deloitte.com) is now the insurance research leader at the Deloitte Center for Financial Services. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn.

This piece is published with permission from Deloitte. See www.deloitte.com/about to learn more about Deloitte’s global network of member firms.

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