Buenos Aires/Geneva: A global supervisory and regulatory survey of the insurance sector’s action on climate has uncovered significant differences between many insurers and reinsurers’ awareness of climate change as a risk, and steps taken to identify, assess, and disclose information on the risks they face. Gathering responses from nearly 1200 entities (groups and firms) across 15 jurisdictions, the survey was designed to assess insurers’ and reinsurers’ levels of awareness, uptake and implementation of the Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD Recommendations, released in June 2017, set a voluntary framework for the identification, assessment, and disclosure of climate-related risks and opportunities by corporate and financial sector entities.
The survey was implemented by members of the Sustainable Insurance Forum (SIF), the global leadership group of supervisors collaborating on climate change and sustainability risks. A first-ever international effort, the survey drew on a range of data sources, including the NAIC Climate Risk Disclosure survey – which some SIF member jurisdictions require larger insurers in their jurisdiction to respond annually. The SIF held its Sixth Meeting in Buenos Aires, alongside the Global Seminar of the International Association of Insurance Supervisors (IAIS). At this meeting, the SIF welcomed four new member jurisdictions (Canada, Egypt, Ireland, and New Zealand), bringing its membership to 25 supervisory bodies.
The purpose of this SIF survey effort was to assess the progress of voluntary uptake of the TCFD Recommendations, and examine the potential need for supervisory engagement and interventions to support insurers’ efforts. While TCFD-aligned disclosures are primarily oriented towards investors, some supervisors are looking to such disclosures as an indicator of the strength of long-term business planning and prudential resilience to climate impacts. The findings of the survey reflect recent the findings of the recent 2019 TCFD Status Report, which found slow progress on climate risk disclosure within the insurance sector – with insurers lower than the average across corporate sectors for eight of eleven recommended disclosure categories.
Geoff Summerhayes, Chair of the SIF, said: “While there is some leadership on climate risk disclosure by a few of the world’s major insurers, the vast majority of the sector is not yet assessing and disclosing climate risk information in a consistent or systematic way. Considering that changes in climate-related natural disasters – such as extreme weather, or wildfires – are happening faster than previously expected, it is imperative that supervisors and regulators gather necessary information from firms to ensure that insurance markets are safe and stable in the face of impending climate-related disruptions. The TCFD provides a consistent framework to help guide industry forward – however, it will be up to supervisors to use the range of instruments at their disposal to ensure that the critical (and complex) set of issues presented by climate change are adequately addressed.”
At the SIF meeting, supervisors recognized that action on climate risk disclosure is progressing unevenly within and across markets. While SIF member supervisors welcome and encourage voluntary action to address climate change risks (including through the release of TCFD-aligned disclosures), they recognize that further action and engagement may be necessary to motivate comprehensive efforts by general, life, and specialist insurers and reinsurers – considering proportionality and levels of insurance market development.
To support this, members of the SIF will work with the Secretariat to develop an Issues Paper on climate risk assessment and disclosure focusing on TCFD implementation, following from the landmark Issues Paper on Climate Change Risks issued with the IAIS in 2018. As part of this work, the SIF is planning to conduct engagement with industry stakeholders in Q3 2019. The SIF will also advance a new research project on the consideration of climate change risk factors in insurance-sector stress testing and scenario analysis. This work will support the future efforts of other supervisory coalitions (such as the Central Bank and Supervisors Network for Greening the Financial System), which have signaled intent to develop tools for climate scenario analysis.
Victoria Saporta, Chair of the IAIS Executive Committee, and Executive Director of Prudential Policy Directorate at the Bank of England, said: “Our collaboration with the SIF offers our Members a dedicated platform for an exchange of supervisory practices, which then facilitates an acceleration of the conversation among our broader membership. The IAIS will increase its focus on helping its Members to proactively respond to a range of emerging trends and developments, particularly in the areas of climate risk and sustainable development. We look forward to our continued partnership with the SIF and an engaged conversation with our broader stakeholders on the topic of climate risks. Moreover, we believe that the work of the IAIS, both undertaken independently and in partnership with the SIF, can support the objectives of other bodies – including the NGFS – by bringing a specific insurance sector perspective”.
Notes to Editors
SIF/IAIS 2018 Issues Paper on Climate Change Risks to the Insurance Sector is available at: https://www.sustainableinsuranceforum.org/publication/issues-paper-on-climate-change-risks-to-the-insurance-sector/
2019 TCFD Status Report is available at: https://www.fsb-tcfd.org/publications/tcfd-2019-status-report/