A business built on ESG: Parhelion’s CEO unveils ambitious plans

At the start of June, London-based insurance broker Howden announced the launch of Parhelion, “the world’s first fully sustainable insurer”. Named after an atmospheric optical illusion, sometimes known as a “mock sun”, the business aims to raise $500 million in the coming months and start writing business in January 2022.

The new firm promises to align not only its investments but also its underwriting with high environmental, social and corporate governance (ESG) standards, and to support its clients with their ESG journeys. According to Howden, the firm will help meet the risk financing needs of a greener economy in an industry starved of truly sustainable capacity.

According to Parhelion founder Julian Richardson, it’s been a long time coming. He joined Intelligent Insurer’s online platform for discussion and debate, the Re/Insurance Lounge, to talk about the new venture and the need for sustainable insurance solutions.

A long time coming

It may be newly backed by Howden, but Parhelion has been around for a considerable time, Richardson said. He created the company back in 2006, after a career in which he worked for Sedgwick, Marsh, and US multinational GE, where he was a senior underwriting risk manager.

Launching the business to explore the role of insurance in sustainability, at the time, he was focused on the carbon trading markets, and he helped set up one of the early carbon finance vehicles. The launch of Parhelion Capital is the culmination of this 15-year journey: “a fully capitalised global insurance and reinsurance business with ESG and sustainability at its heart”.

“Parhelion brings a pure play proposition to the insurance market to give clients the choice to start greening their insurance spend,” Richardson explained. For him, this “greening” is the natural endpoint to the ESG journey so many businesses are on, as they come under pressure to review their procurement.

“They are increasingly changing to buying sustainably sourced goods, but it mustn’t stop at sustainable goods: it has to include financial services and other services, and at the moment, if you want to go to an insurer that is deemed fully sustainable, it’s not possible,” he said.

“Until companies can green every single procurement item on their P&L, they won’t have a sustainable company, and we won’t have a sustainable economy.”

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ESG across the board

ESG and sustainability will be “at the heart” of the business and throughout it, according to Richardson. In practice, this will impact where it invests, what it writes and how it operates.

First, the business will have ESG and sustainability investments filters on its asset side. Many insurers already have this for some of their assets, but Parhelion will apply them to all assets.

Second, in its operations, it will “walk the walk”, he promised, upholding the same ESG standards it seeks to promote in its investments.

Third, it will apply ESG to its underwriting practice. It is targeting large corporate clients usually written in the London Market, but will exclude fossil fuels, marine, aviation, and tobacco business, for example.

The aim is to have a comprehensive range of traditional products, including property, third party liability, general professional liabilities, and some agricultural risks. These will account for most of its business. In addition Parhelion plans to back new product development and “support capital deployment into sustainable investment opportunities”. It is already exploring environment commodity trading.

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“Nothing is invested without insurance being in place, so as an industry we have a really important role in helping form that capital stack and take risks that the equity and debt providers can’t—or won’t—take to drive more sustainable investment,” he said.

Richardson added that Parhelion will draw on its learning to provide advisory and other bundled services to help clients with their own “ESG transitions”.

Better late than never

As for the timing of the launch, Richardson admitted to some luck that it has come about as the market is hardening. It is also launching when ESG has—finally—come to the fore in insurance.

As Richardson remarked: “After 20 or 30 years, ESG is now becoming an overnight success.”

He thinks it is the result of several long and short-term factors, from the governance failures of the 2008 financial crisis to the Black Lives Matter movement and the COVID-19 pandemic.

“It’s a culmination of many things leading to a tipping point, where it has just taken off,” he said.

That’s reflected not just in Parhelion’s ambitious plans for growth—targeting $850 million of premium income by its fifth year—but also in helping the business attract talent, according to Richardson. Recent hires include Chris Sharp, former underwriting director at Dale Underwriting Partners and head of specialty reinsurance at Ark, as chief executive officer, and Leah Rose, in-house solicitor at Brit Insurance, as head of legal.

“We have been overwhelmed by the high quality of the people that are attracted to join us,” said Richardson. “People want to work for organisations that do more than just renew a bit of insurance, and to have some purpose.”

To view the full Re/insurance Lounge session click here