ESG Performance and Regulatory Solvency: Evidence from European Insurers under Solvency II

Abstract

The purpose of this article is to investigate the influence of ESG performance on the regulatory solvency of European insurers. Using an unbalanced panel of 31 listed European insurance groups from 2016 to 2024, this article measures regulatory solvency by the Solvency Capital Requirement (SCR) ratio and explores the link between ESG and solvency using fixed-effects panel regressions. The results suggest that ESG performance is positively related to the SCR ratio in simpler models, but this relationship disappears once year fixed effects are added. The environmental, social, and governance pillars are not individually significant, and ESG does not act as a buffer during the 2020 and 2022 stress years. In general, ESG effects may not be visible in the headline SCR ratio. This paper is among the first to examine the link between ESG performance and regulatory solvency for European insurers using hand-collected Group SCR ratios.