Our Business
The services and insurance coverages we provide protect our clients, allow them to rebuild after major losses and improve their resilience. Helping our clients manage uncertainty begins with assessing and addressing risks and collaborating in a changing world that includes heightened climate perils and evolving societal demands.
Enterprise Risk Management Strategy
Our Enterprise Risk Management team formally identifies and integrates ESG performance, including climate change and climate-related risks, into our Risk Register and extends that analysis to specific climate-related business risk evaluations in line with the recommendations of TCFD. See our TCFD Report, which discusses climate risks and opportunities applicable to our business across the short-, medium- and long-term.
- Risk management responsibilities are delegated across our organization through a “Three Lines of Defense” approach to risk governance. See the detailed table below.
- Our Board of Directors and its committees are responsible for governing the organization and overseeing its activities and the performance of executive management in implementing corporate strategies. See the workflow of our Board’s oversight of key sustainability risks on the respective committees’ expertise on page 12 of our Sustainability Report.
- Specific areas of research and focus in 2023 included U.S. severe thunderstorm, model-based storm surge, Hurricane Ian post-loss assessments and wildfires. We also completed a European Union windstorm review and an assessment of the impact of climate change on EU secondary perils (floods/wildfires/severe thunderstorms).
Evaluating Environmental Exposures
The insurance industry is positioned to play a role in facilitating the transition toward decarbonization. At Arch, we are taking steps to address the climate challenge and support our insureds in their efforts to adapt and strengthen their resilience.
Our Approach
As a global insurer, we take a proactive approach to reducing risk and taking advantage of opportunities in our underwriting for the benefit of our stakeholders. Through our Thermal Coal Policy, we integrate environmental considerations into our underwriting processes for thermal coal-related business accounts. This policy, which applies to our global insurance underwriting, outlines the key considerations designed to fully evaluate risk and trigger escalations as necessary for further consideration. Our U.K. insurance companies also apply sector-specific guidelines pertaining to Arctic energy exploration and production and oil sands mining and surface extraction. These policies set forth the scope and screening parameters for the assessment and escalation referral process for business accounts in these environmentally sensitive sectors. The chart shows the outcome of out 2023 Submissions in these areas.
2023 Submissions
Since implementation of our Thermal Coal Policy, we have decreased our underwriting of thermal coal accounts for various reasons including:
- Account had no climate-related transition plan.
- Insured was benefiting from deforestation.
- Insured was a stand-alone coal mine.
This chart represents our 2023 worldwide escalations, including global coal escalations (none from the U.S. underwriting group) and 13 referrals from our U.K. business related to oil sands and Arctic energy exploration and drilling (all proceeded/bound). Our U.S. underwriting groups phased out of the majority of coal accounts at the end of 2021.
Financing the Climate Transition
We are taking steps to address the climate challenge and help insureds adapt and build resilience. Through our specialty insurance products and solutions:
- Our dedicated team of surety underwriters specialize in the renewable energy with a specific focus on solar, wind, battery/energy storage, biomass and hydro opportunities for financial assurance requirements.
- Arch supports sustainable global energy needs by covering onshore and offshore renewable energy and alternative energy technologies, including, solar, wind, battery energy storage systems, hydro, biofuel, geothermal and small nuclear reactors.
- We are committed identifying business opportunities associated with environmentally friendly practices that also incentivize responsible environmental behaviors.
- Arch Risk Control service platform provides environmentally focused support and training to our insureds.
Enabling Health, Safety and Optimal Outcomes for Our Customers
Our Risk Control service platform offers health and safety support and best practice recommendations for our insureds. This support includes:
- Helping customers develop and implement consistent workplace safety orientation and training programs.
- Assisting clients in developing plans and implementing best practices to eliminate or minimize exposure to common hazards, including driving hazards, highway work zone accidents and slip/fall exposures in retail environments.
- Helping customers properly screen and manage employee drivers of all types of vehicles to improve their on-the-road safety performance.
- Provide access to web-based platforms to keep our insureds informed with up-to-date industry news and insights, and equip them with supplemental resources to enhance our policyholders’ safety, health, compliance and loss prevention programs.
Access to Finance and Social Equity Products
We are committed to ensuring a sustainable future for our insureds by offering a range of products and customer-oriented solutions that help build safer, stronger and more inclusive communities.
- Through our mortgage insurance (MI) products, we enable families to purchase homes and accumulate wealth. In 2023, 132,000 families in the U.S. attained homeownership with Arch MI, approximately 29% of whom were low-income buyers.1
- Our sovereign credit and political risk underwriting programs help the governments of developing countries gain financing. We facilitate these opportunities by insuring the lenders against the risk of a sovereign default. We have cultivated relationships with top-tier multilateral organizations to support projects that deliver improved economic and social growth that align with Arch’s values.
- Arch’s agriculture team facilitiates micro-insurance schemes in numerous developing countries, providing security for banks and local financial institutions to extend essential bank loans to smallholder farmers.
- Our lease rental bond program issues surety bonds to offer rent payment security for apartment leases throughout the U.S; since its launch, the program has aided more than 61,000 individuals or families achieve their housing goals.
- Our subsidiary, McNeil & Company, Inc., has insured firefighters and emergency responders through our insurance programs and we also host a risk management webinar series. We offer over 5,000 courses on an E-learning platform with over 119,000 users from 5,200 organizations.
1 Loans where the qualifying income was less than 80% of the area median income in their census tract; includes both purchase and refinance.
Three Lines of Defense
Risk management responsibilities are delegated across our organization through a “Three Lines of Defense” approach to risk governance. This risk management framework, supported by key controls, is embedded within our operations and enables us to limit risk and evaluate opportunities. We view ESG related risks not as standalone risks but as enterprise-wide in their scope.
Three Lines of Defense
Download the chart above as a PDF.
