Insurance Circular Letter No. 5 (2021)

March 16, 2021

TO:All New York Domestic and Foreign Insurance Companies
RE:Diversity and Corporate Governance

As Superintendent of the New York State Department of Financial Services (DFS), I have consistently stressed the critical importance of diverse perspectives to problem-solving. Research shows that diverse teams perform better, innovate more, and are more effective at managing risks. This is why I have made diversity a priority in hiring a strong leadership team at DFS, and renewed our commitment to diversity, equity and inclusion (DEI) through the creation of the agency’s first employee affinity groups and plans for a new Office of Diversity & Inclusion that will be charged with developing a strategic plan and DEI objectives for DFS. It is also why, in the fall of 2019, New York State’s Council on Women and Girls formed a committee to improve the representation and advancement of women, including women of color, in financial services, which I co-chair.

Risk management, which is the bedrock of the safety and soundness of the insurance industry, goes to the heart of DFS’s mandate as a financial regulator. DFS has broad statutory authority to ensure the financial stability of New York’s insurance industry and the prudent conduct of the providers of insurance products and services, but also to promote the growth of the industry and protect the public interest and the interests of policyholders, creditors and shareholders of New York-regulated insurers.

Risk and corporate governance are inextricably linked, as boards and management are ultimately responsible for understanding and managing the risks that their companies are taking or facing. For this reason, corporate governance has been a key and growing focus of insurance regulators. This focus is evidenced by the adoption of the Corporate Governance Annual Disclosure Model Act and Regulation by the National Association of Insurance Commissioners (NAIC) in 2014, which became an accreditation requirement last year. New York adopted the Model Act with certain modifications by regulation on July 31, 2020. Both the Model Act and the New York regulation require insurers to disclose, among other things, whether they have a diversity policy and how it functions.

Institutions and communities around the world have been uniquely tested by COVID-19, reminding us of the staggering human and financial costs of failing to address systemic risks. Overlapping crises—the pandemic, economic downturn, racial unrest and climate change—are ushering sweeping changes in our society and economy. These changes are challenging leaders in both business and government to prepare for and adapt to the “new normal.” To remain competitive, companies must be able to think outside the box to manage evolving risks and identify new avenues for growth. Governance, including strong executive teams that reflect a diversity of skills, experiences and perspectives, never matters more than in times of great change, which are also times of great opportunity for the best minds in the public and private sectors to work together to reimagine, rebuild and renew.

We recognize the commitment of many insurance company CEOs to increase the representation of women, people of color and other underrepresented groups on their boards and management teams, and in their workforce generally. We also applaud the DEI initiatives announced by insurance trade groups, including the American Council of Life Insurers (ACLI), the American Property Casualty Insurance Association (APCIA) and the National Association of Mutual Insurance Companies (NAMIC), both before and in the wake of the anti-racism protests sparked by the murder of George Floyd.

While the insurance industry’s public statements of support for diversity and DEI initiatives are important and necessary, our challenge is to move beyond words and good intentions to actions and real change. This circular letter is intended to support the industry’s existing DEI efforts and to outline DFS’s expectation that New York-regulated insurers make the diversity of their leadership a business priority and a key element of their corporate governance.

Diversity as a Business Imperative

Research shows that DEI is good for companies’ bottom lines.

Increased Profitability

According to a report published last year by McKinsey, which has been following the trajectories of hundreds of companies since 2014, the business case for DEI is stronger than ever.1 The report, which looked at over 1,000 companies in 15 countries, found that companies in the top quartile of ethnic and cultural diversity on their executive teams outperformed those in the fourth by 36% in terms of profitability in 2019.2 Similarly, in the case of gender diversity, companies in the top quartile were 25% more likely to experience above-average profitability than peer companies in the fourth quartile.3 Furthermore, the higher the representation of women and people of color, the greater the likelihood of outperformance.4 Because the correlation between executive team diversity and financial outperformance has strengthened over time, companies lagging on the diversity front are increasingly likely to suffer a performance penalty.5

Broader Customer Base

Insurance companies have a vested interest in hiring employees and building leadership teams that reflect the diversity of society and the consumers that they serve. A report published by Oliver Wyman last year states that “financial services firms are missing at least a $700 billion revenue opportunity each year by not fully meeting the needs of women customers.”6 These opportunities are expected to grow as women increasingly control more wealth, buying power, and financial decisions.

Similarly, the U.S. Census Bureau projects that the percentage of non-Hispanic white people will decline from roughly 60% today to 44% in 2060.7 By contrast, the percentage of Hispanics, African-Americans and Asians will increase from approximately 18%, 13% and 6%, to 28%, 15% and 9%, respectively.8 A 2013 study by the Harvard Business Review found that a lack of diverse leadership causes companies to miss out on crucial market opportunities as inherently diverse contributors understand the unmet needs in under-leveraged markets.9 Companies that value diversity in their leadership and workforce (in particular consumer-facing employees), as well as their third-party providers (especially those influencing business strategy and development), will have a greater understanding of the preferences of their customers and a competitive advantage over companies that do not adapt to changing demographics.

More Innovation

Diverse leadership teams innovate more and are better at solving problems. A 2018 study by Boston Consulting Group, which surveyed employees at more than 1,700 companies in eight countries, found “a strong and statistically significant correlation between the diversity of management teams and overall innovation.”10 Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19% higher than companies with below-average leadership diversity, with nearly half of the revenue of companies with more diverse leadership coming from products and services launched in the prior three years.11 People with different backgrounds and experiences can see the same problem in different ways and come up with different solutions. This ability is critical as companies seek to adapt to an increasingly dynamic market and changes in customer demand, which have been disrupted, in some cases dramatically and perhaps permanently, by COVID-19.

Better Risk Management

The ability to accurately assess information is essential to effectively managing risk. Studies have shown that teams comprised of people from diverse backgrounds focus more on the facts and process those facts more carefully.12 Diverse teams are more likely to remain objective and avoid entrenched ways of thinking that can blind them to key information and lead to errors in the decision-making process.13

According to recent research compiled by Catalyst, companies with gender-diverse boards have been found to be less likely to engage in controversial business practices such as fraud and earnings manipulation or to make overly risky investment decisions; commit fewer financial reporting mistakes; are more likely to demand higher-quality audits; and outperform non-diverse boards in environmental, social, and governance (ESG) activities.14 Studies have also shown that companies with diverse leadership teams are subject to less litigation risk. Gender-diverse management teams are associated with fewer operations-related lawsuits,15 while the presence of three or more female and ethnic minority board members, who are more likely to identify with and provide support to employees of underrepresented groups, significantly reduces the likelihood of large-scale discrimination lawsuits.16

Larger Talent Pool and More Satisfied Employees

Prioritizing DEI in recruitment and hiring enables companies to tap into the full pool of available talent. Given that the U.S. Bureau of Labor Statistics has long predicted an impending talent shortage for critical insurance roles,17 insurers should use this opportunity to expand their efforts to attract and employ diverse candidates. As a result of the widespread shift to virtual work environments during the pandemic, more companies are planning to use remote work to increase diversity in their hiring and open up opportunities for existing employees.18 At the same time, organizations that value DEI are more successful at engaging and retaining their employees. Recent studies compiled by Catalyst show that diverse and inclusive work cultures are associated with reduced instances of interpersonal aggression and discrimination, increased job satisfaction and commitment to the company, and lower levels of employee turnover.19 According to Deloitte’s 2018 Millennial Survey, diversity and inclusion are key to attracting and retaining young talent as millennials and Generation Z correlate diversity with a forward-thinking mindset and view diversity, particularly when embedded in senior management teams, as a tool to boost both business and professional performance.20

Diversity in the Insurance Industry

Diversity information for boards and management of U.S. insurance companies is extremely limited. Although some statistics suggest that the representation of people of color and women in entry-level positions in the insurance industry is comparable to their demographics in the overall U.S. population, the numbers drop dramatically as they climb the corporate ladder.21 According to a McKinsey report, while people of color made up approximately 24% of the insurance industry’s entry-level workforce in 2017, only 8% made it to the C-suite.22 Similarly, women accounted for 57% of the industry’s entry-level workforce, but only 18% made it to the C-suite and only 1% of those C-suite executives were women of color.23 By contrast, people of color and women represent approximately 24% and 51% of the U.S. population, respectively.24

Across all industries, McKinsey reported last year that white men held 66% of all C-suite positions, compared to 19% for white women, 12% for men of color, and 3% for women of color.25 A strikingly similar picture emerges for boards of the largest U.S. corporations. According to a report by Deloitte and the Alliance for Board Diversity, white men held 66% of all board seats at Fortune 500 companies in 2018, compared to 18% for white women, 12% for men of color, and 5% for women of color.26 While the numbers show slight year-over-year increases, the progress has been slow and does not reflect demographic changes in the U.S. over the same period of time.

To prioritize the diversity of their boards and management, companies must also foster a diverse pipeline of future leaders. Leaders are made, not born, and it takes a long time to groom candidates for the C-suite. Recruiting, training and retaining high potential individuals reflecting a diversity of experiences and backgrounds, including as a result of their race, ethnicity or gender, is critical for organizations committed to increasing diversity at the top. Equally important is to ensure that promising executives acquire the necessary experiences to be considered for the most senior positions in a company. For example, one reason given for the dearth of women and people of color in CEO ranks is that so few of them are given opportunities to oversee a business division or unit with profit-and-loss (P&L) responsibility, which is typically viewed as a prerequisite to running a company.27

It is too early to assess the economic impact of the pandemic on women and people of color in the U.S. workforce. However, there are early indications that COVID-19 has exacerbated headwinds that continue to disproportionately impact women and people of color. Companies should monitor and proactively address these developments, which could significantly set back efforts to increase the diversity of their leadership and workforce. In particular, more than 2.3 million women have left the labor force during the pandemic,28 stalling their careers and jeopardizing their financial security, while others are struggling under the pressure of balancing increasing demands at home with their professional responsibilities.29 Women’s labor force participation rate—the percent of adult women either working or looking for work—hit a 33-year low in January 2021 at 57%, with Black women and Latinas particularly hard hit by the economic crisis.30 People of color, who already face more barriers to advancement than most other employees, are also coping with the emotional toll of repeated instances of racial discrimination and the outsized impact of COVID-19 on their communities.31

Investor and Government Actions

Given the business case for diversity, it is not surprising that increasing pressure is coming from investors and other financial groups as well as governments.

Since 2017, large institutional investors like BlackRock and State Street Global Advisors have been pushing companies to diversify their boards, threatening to vote against board members on nominating or governance committees that failed to respond to investors’ concerns about gender diversity.32 Starting this year, State Street will vote against board nominees at companies that do not disclose the racial and ethnic composition of their boards and, starting in 2022, will demand that S&P 500 companies report the racial and ethnic composition of their entire workforce.33 Last year, New York City Comptroller Scott Stringer called on 67 public companies in which New York City Retirement Systems are invested, and which issued supportive statements on racial equality, to disclose publicly the composition of their workforce by race, ethnicity and gender.34

Taking it one step further, shareholder derivative lawsuits have been filed against the boards of several high-profile companies alleging that board members and other executives made material misstatements and omissions to investors about their companies’ professed commitment to DEI, and breached their fiduciary duties by failing to implement their DEI programs into their boards and C-suites.35

Investors may also start to reward companies that make diversity a priority. For example, last month, the private equity firm Carlyle Group announced that it had secured a $4.1 billion credit facility that ties borrowing costs to the firm’s goal of having 30% diverse directors on the boards of its portfolio companies within two years of their acquisition.36 Goldman Sachs announced last year that it will only underwrite initial public offerings in the U.S. and Europe of private companies that have at least two diverse board members.37 More recently, Nasdaq filed a proposal with the U.S. Securities and Exchange Commission (SEC) that would require listed companies that do not have at least one woman on their boards, in addition to a director who is a racial minority or self-identifies as lesbian, gay, bisexual, transgender or queer, to delist.38

Countries like Belgium, France, Italy and Norway have had statutory gender quotas in place for years to increase the representation of women on the top decision-making bodies of their largest publicly-traded companies, as well as rigid sanctions for non-compliance.39 California passed laws requiring that the boards of publicly-held corporations whose principal offices are located in California have at least one woman by the end of 2019,40 and at least one director who is racially, ethnically or otherwise diverse by the end of 2021.41 Last year, Canada began requiring corporations governed by the Canada Business Corporations Act with publicly-traded securities to disclose information to their shareholders on the diversity of their boards of directors and senior management teams.42 Last summer, the NAIC formed a Special Executive Committee on Race and Insurance that is charged with, among other things, researching and analyzing the level of diversity in the insurance sector, engaging with a broad group of stakeholders on issues related to race and diversity in the industry, and making recommendations regarding steps that regulators and the industry can take to increase its diversity.43

Last but not least, the Biden administration has made clear that diversity will be a priority. SEC acting Chair Allison Herren Lee recently stated that the SEC should consider revisiting disclosure requirements for public companies and strengthening guidance on board diversity,44 and it has been reported that the President’s SEC Chairman nominee may also be in favor of company disclosure of diversity data.45

DFS Expectations for New York-Regulated Insurers

For all the reasons outlined in this circular letter, DFS expects New York-regulated insurers to make the diversity of their leadership a business priority and a key element of their corporate governance. Insurers should also focus on their pipeline of future diverse leaders as well as the diversity of their insurance producers and third-party providers. Companies should treat diversity like other strategic priorities for their businesses, including communicating its importance to all stakeholders, explaining how it will be achieved, setting goals and measuring progress toward those goals. Questions relating to an insurer’s diversity-related efforts will be integrated into DFS’s examination process starting in 2022.

DFS has evaluated different regulatory approaches to promote DEI in the insurance industry, including the imposition of quotas and the collection and disclosure of diversity data on a company-by-company basis. We have also had many informal conversations with insurers, trade groups and diversity experts to hear about the industry’s commitment to increasing the diversity within its ranks and challenges faced by insurers in their efforts. We would like to recognize the contributions of the members of New York State’s Committee for the Advancement of Women in Leadership in Financial Services, from whom we received invaluable input in the early stages of our work.

Based on our research and outreach, we have determined that the best way for DFS to support the insurance industry’s DEI efforts is by collecting and publishing data relating to the diversity of corporate boards and management. Data collection is essential to identify areas for improvement, set goals and measure progress toward those goals. Given the limited availability of insurance-specific diversity data, making that information public will allow companies to assess where they stand compared to their peers and, we hope, raise the bar for the entire industry. Transparency is a powerful catalyst for change.

Increasing the diversity of a company’s leadership should not be a check-the-box exercise, where the company can claim success if it has a minimum number of diverse board members or executives. To be sure, one or two diverse board members is better than none, but that is neither the goal nor sufficient, particularly for a large board. The same is true for the C-suite. Rather, a company should strive to have a board and management team that benefit from the broadest diversity of skills, experiences and perspectives possible, including based on a person’s gender, race or ethnicity. DFS understands that insurers are not all starting from the same place in terms of the diversity of their leadership and workforce. Each company should assess where it stands, where it wants to go and how it will get there, taking into consideration its size and other relevant factors, with a focus on improvement over time.

As a first step, DFS will collect data from New York domestic and foreign insurers with more than $100 million in annual New York premiums relating to the gender, racial and ethnic composition of their boards and management as of December 31, 2019 and 2020, including information about board tenure and key board and senior management roles. We expect to collect the data over the summer and to publish results in the fall on an aggregate basis based on the type of insurer and other relevant factors. We strongly encourage companies to disclose publicly the diversity composition of their boards and management as part of their DEI commitment to their stakeholders. DFS will consider collecting and disclosing similar information in the future, including on a more granular basis, taking into account any other data collection and disclosure requirements that may be imposed on the insurance industry.


Increasing the diversity of the leadership and workforce of insurers is a business and corporate governance imperative that will make the insurance industry stronger and more resilient. We commend the companies that have already taken meaningful steps to promote diversity within their ranks, and we look forward to supporting others just getting started. In response to feedback from industry participants, DFS will organize a webinar focused on DEI best practices and addressing specific issues that companies have encountered in their diversity efforts.

Please direct questions regarding this circular letter to [email protected].



Linda A. Lacewell
Superintendent of Financial Services

1 Dixon-Fyle, S., et al. (May 2020). Diversity wins: How inclusion matters. McKinsey & Company, pp. 3-5. Retrieved from:

2 Ibid.

3 Ibid.

4 Ibid.

5 Ibid.

6 Clempner, J., et al. (2019). Women in Financial Services 2020. Oliver Wyman, p. 19. Retrieved from:

7 Vespa, J., et al. (Issued March 2018, Revised February 2020). Demographic Turning Points for the United States: Population Projections for 2020 to 2060. United States Census Bureau, p. 7. Retrieved from:

8 Ibid.

9 Hewlett, S., et al. (December 2013). How Diversity Can Drive Innovation. Harvard Business Review. Retrieved from: Harvard Business Review

10 Lorenzo, R., et al. (January 23, 2018). How Diverse Leadership Teams Boost Innovation. BCG Henderson Institute. Retrieved from: Boston Consulting Group Henderson Institute

11 Ibid.

12 Rock, D., et al. (November 4, 2016). Why Diverse Teams Are Smarter. Harvard Business Review. Retrieved from: Harvard Business Review

13 Ibid.

14 Catalyst. (June 24, 2020). Why Diversity and Inclusion Matter: Quick Take. Retrieved from:

15 Ibid.

16 Abebe, M., et al. (November 2019). From tokens to key players: The influence of board gender and ethnic diversity on corporate discrimination lawsuits. Human Relations, 74(1), pp. 22-24. Retrieved from: Human Relations

17 Deloitte. (2013). Talent 2020: Surveying the talent paradox from the employee perspective. Retrieved from:

18 Thomas, R., et al. (2020). Women in the Workplace 2020. McKinsey & Company and LeanIn.Org, p. 51. Retrieved from:

19 Catalyst. (June 24, 2020). Why Diversity and Inclusion Matter: Quick Take. Retrieved from:

20 Deloitte. (2018). 2018 Deloitte Millennial Survey, pp. 7-8. Retrieved from:

21 Catlin, T., et al. (July 2020). Transforming the talent model in the insurance industry. McKinsey & Company, pp. 7-8. Retrieved from:

22 Ibid.

23 Ibid.

24 United States Census Bureau. (2019). Quick Facts: United States. Retrieved from:

25 Thomas, R., et al. (2020). Women in the Workplace 2020. McKinsey & Company and LeanIn.Org, p. 8. Retrieved from:

26 Deloitte. (2018). Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards. Deloitte and Alliance for Board Diversity, p. 17. Retrieved from:

27 Fuhrmans, V. (February 6, 2020). Where Are All the Women CEOs? The Wall Street Journal. Retrieved from: The Wall Street Journal; Chen, T. (September 28, 2020). Why Are There Still So Few Black CEOs? The Wall Street Journal. Retrieved from: The Wall Street Journal

28 Ewing-Nelson, C. (February 2021). Another 275,000 Women Left the Labor Force in January. National Women’s Law Center, p. 1. Retrieved from: National Women’s Law Center

29 Thomas, R., et al. (2020), Women in the Workplace 2020. McKinsey & Company and LeanIn.Org, p. 12. Retrieved from:

30Ewing-Nelson, C. (February 2021). Another 275,000 Women Left the Labor Force in January. National Women’s Law Center, p. 1. Retrieved from: National Women’s Law Center

31 Thomas, R., et al. (September 2020). Women in the Workplace 2020. McKinsey & Company and LeanIn.Org, p. 6. Retrieved from:

32 State Street. (March 7, 2017). State Street Global Advisors Calls on 3,500 Companies Representing More Than $30 Trillion in Market Capitalization to Increase Number of Women on Corporate Boards [Press Release]. Retrieved from:; Hunnicutt, T. (July 13, 2017). BlackRock supports effort to boost number of women board members. Reuters. Retrieved from: Reuters

33 Nauman, B. (January 10, 2021). State Street to insist companies disclose diversity data. Financial Times. Retrieved from: Financial Times

34 New York City Comptroller Scott Stringer. (July 1, 2020). Comptroller Stringer and Three New York City Retirement Systems Call on 67 S&P 100 Companies Who Issued Supportive Statements on Racial Equality to Publicly Disclose the Composition of their Workforce by Race, Ethnicity and Gender [Press Release]. Retrieved from:

35 LaCroix, K. (September 2, 2020). The Gap Hit with Board Diversity Derivative Lawsuit. The D&O Diary. Retrieved from:

36 Carlyle. (February 17, 2021). Carlyle Announces Largest ESG-Linked Credit Facility in the US at $4.1 Billion and First-Ever Exclusively Tied to Board Diversity [Press Release]. Retrieved from

37 Goldman Sachs. (February 4, 2020). Goldman Sachs’ Commitment to Board Diversity. Retrieved from:

38 Osipovich, A., et al. (December 1, 2020). Nasdaq Seeks Board-Diversity Rule That Most Listed Firms Don’t Meet. The Wall Street Journal. Retrieved from: The Wall Street Journal

39 Arndt, P., et al. (2019). Gender quotas in a European comparison: Tough sanctions most effective. DIW Weekly Report, pp. 339-41. Retrieved from:

40 State of California. (2020). Women on Boards. Retrieved from:

41 Steele, A. (October 1, 2020). California Rolls Out Diversity Quotas for Corporate Boards. The Wall Street Journal. Retrieved from: The Wall Street Journal

42 Government of Canada. (2021). Diversity of boards of directors and senior management. Retrieved from:

43 National Association of Insurance Commissioners. (July 23, 2020). NAIC Announces Special Committee on Race and Insurance [Press Release]. Retrieved from:

44 Reuters. (February 25, 2021). U.S. SEC should revisit disclosure requirements on diversity – acting chair. Retrieved from:

45 Sorkin, A., et al. (January 13, 2021). Potential Priorities for Wall Street’s Next Top Cop. Retrieved from: The New York Times DealBook