“a global insurance system where sustainability factors are effectively integrated into the regulation and supervision of insurance companies.”
What is sustainable insurance?
The global insurance sector will play a pivotal role in the transition to a low-carbon, resilient and sustainable global economy, both in terms of
the risks it covers and the investments it makes.
Sustainable insurance is a strategic approach where all activities in the insurance value chain are conducted in a responsible and forward-
looking manner by identifying, assessing, managing, and monitoring risks and opportunities associated with environmental, social and
The UNEP FI Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to tackle sustainability issues,
including climate change.
Programme of Work 2021-2023
In 2020, the SIF members agreed to build on progress through a new programme of work for 2021-2023.
This has been designed to reflect SIF’s unique position by focusing efforts on three thematic areas and producing
a smaller number of high-quality outputs. Beyond this, SIF will partner with specialist organisations to influence,
support and raise awareness of work in this area.
Three areas of work:
1 . Climate-related risk on the insurability of assets
As insurers become better able to price and manage climate risks, a desirable prudential outcome would be that insurers continue offering coverage against climate-related perils on a sound, risk-adjusted basis.
SIF could support this by highlighting the approaches taken both by insurers and regulators in different jurisdictions to mitigate risks while offering affordable insurance, such as:
- new products being offered, including parametric insurance, to address climate risk protection gaps;
- private-public partnerships to minimise the impact of weather events;
- promoting transparency and disclosures around climate related risks and insurability; and
- updating building codes.
2. Sustainability beyond climate change
As humans continue to contribute to environmental degradation, habitat destruction and biodiversity loss, the impacts of zoonotic disease outbreaks, supply chain disruption, and ultimately, insurance risks and financial instability, will increase.
In particular, with a worldwide focus on the impacts that pandemics may have in the wake of Covid-19, it is relevant for the SIF to explore how biodiversity loss can translate into financial risks for the insurance sector.
3. Climate risks in actuarial processes
Climate change has implications for a wide range of the work performed by actuaries, due to its impacts on mortality, health, financial stability, asset valuation and insurance risks, among other risks. Actuaries are continuing to improve the understanding and quantification of climate impacts on insurance companies and their methods of conducting business. Climate risks are being considered within the entire actuarial function, including product design, pricing, underwriting, risk management, and the valuation of assets.
With many facets of actuarial functions to be considered, the SIF will have opportunities to assist the understanding and mainstreaming of climate risks into insurance practices.
How does SIF work?
With the launch of the SIF Work Programme (2021-2023), subject to their interest, SIF members and partners will come together to form working groups to support specific work programme items, organized around key issue areas. The working groups will be coordinated by the SIF Secretariat. The working groups will also engage external experts and other stakeholders, such as academics who may be conducting relevant technical research.
2020 – current: Ms. Anna Sweeney, Executive Director – Insurance, Bank of England
2018 – 2020: Mr. Geoff Summerhayes, Executive Board Member of the Australian Prudential Regulation Authority
2016 – 2018: Mr. Dave Jones, Commissioner, California Department of Insurance.
How does the SIF engage with
other international authorities?
As a founder, the SIF works closely with the International Association of Insurance Supervisors (IAIS) on issues relating to sustainability, including climate change risks. This includes the development of collaborative outputs with the IAIS Secretariat, and engaging with the IAIS Executive Committee on sustainability issues relevant to the activities and strategy of the IAIS.
SIF also works in partnership with other supervisory coalitions focused on sustainability-related issues, including the Network of Central Bank and Supervisors for Greening the Financial System (NGFS) and the Financial Stability Institute (FSI) of the Bank for International Settlement (BIS), to provide input on activities relating to insurance supervision and regulation.
More broadly, the SIF works with Partners who are also focused on issues relating to sustainability within the insurance sector. This includes international and intergovernmental groups such as the UNEP FI Principles for Sustainable Insurance (UN PSI) and Access to Insurance Initiative (A2ii).
On 3 March 2021, SIF Chair Anna Sweeney spoke at the Milliman Climate Resilience Forum on ‘Climate resilience strategies for insurance supervisors around the globe’. Her speech can be read here and viewed here. The SIF participated in the PROGRES-seminar session dedicated to ‘Foresight on environmental risks’, hosted by the Geneva Association on 25 March 2021. The meeting minutes are available here. The Fourth Virtual Meeting of the Sustainable Insurance Forum (SIF VM4) was held on 29 March 2021.
The SIF joined the new NGFS & INSPIRE – Greening the financial system joint study group on Biodiversity & Financial Stability, as a member in April 2021.
The SIF/IAIS Application Paper on the Supervision of Climate-related Risks in the Insurance Sector was launched on 25 May 2021 and it has been downloaded more than 4,000 times since then. The IAIS/SIF public webinar on the Application Paper, was held on 9th June and can be viewed here. The SIF/IAIS/UN PSI held two webinar sessions on the Application Paper across the 14th and 15th June to accommodate the different time zones. Combined these were attended by more than 700 attendees which included members of the insurance industry, civil society as well as supervisors. The recordings of the webinars can be viewed here.
On 5 May 2021, the SIF Chair Anna Sweeney, Bank of England participated in the Solvency Workstream Meeting of the National Association of Insurance Commissioners (NAIC) Climate and Resiliency (Ex) Task Force.
In May 2021, the SIF member – the Office of the Superintendent of Financial Institutions (OSFI), produced the French version of the Climate Change Risk Questions Bank for the SIF insurance sector and used it in their training.
The SIF held a working group call in May 2021, to support the development of its scoping study on the Nature Related Risks in the Insurance Sector. The SIF in partnership with the UN Principles for Sustainable Insurance (UN PSI) launched a global survey on nature related risks and the insurance industry in June 2021, which was disseminated to UN PSI’s 200+ members, to support the SIF scoping study.
In June 2021, the SIF held its first working group meeting on Climate risks in actuarial processes, co-hosted by the International Actuarial Association (IAA). The SIF Chair Anna Sweeney, Bank of England also spoke at the Association of Bermuda Insurers & Reinsurers’s members virtual seaside chat in June 2021.
On 8th July, the A2ii and IAIS hosted two dialogues based on the SIF/IAIS Application Paper on the Supervision of Climate-related Risks in the Insurance Sector. Experts from SIF presented highlights from the Application Paper and invited supervisory authorities (including SIF member representatives) shared experiences related to supervision of climatic risks in emerging and developing markets.
On 21 February 2020, SIF hosted the Eighth meeting of the Sustainable Insurance Forum (SIF8) in Basel, Switzerland alongside a meeting of the Financial Stability Institute (FSI) of the Bank of International Settlements (BIS). Due to Covid-19, SIF then hosted two online virtual meetings in May 2020, instead of the planned in-person SIF9 meeting.
SIF launched the public version of the ‘Question Bank on Climate Change Risks to the Insurance Sector’. The broader community, including other relevant industries such as the banking sector, now have access to the types of questions that supervisors may ask entities regarding climate change financial risks.
SIF and the International Association of Insurance Supervisors (IAIS) collaborated on the ‘Issues Paper on the Implementation of the Recommendations of the Task Force on Climate-related Financial Disclosures’. As part of the development of this paper a consultation webinar was held in collaboration with UNEP FI Principles for Sustainable Insurance in January 2020. The paper will be a valuable resource for supervisors taking action to enhance disclosures on climate-related financial risks. Since its launch on the IAIS website, the paper has been downloaded over 2,500 times.
As a follow-up, the SIF and IAIS launched the draft ‘Application Paper on the Supervision of Climate-related Risks in the Insurance Sector’ for public consultation on 13 October 2020 until 12 January 2021. This paper focuses on topics such as enterprise risk management, corporate governance, and investment and disclosure, in line with the Insurance Core Principles. To gather inputs for the paper the IAIS and SIF jointly hosted a webinar on 9 June 2020, which was attended by 300+ members and stakeholders. A public stakeholder event was held on 26 October by the SIF/IAIS which can be viewed here.
In August 2020, SIF launched its first half-yearly report which included updates from 14 of its members and highlighted the need to keep the sustainability agenda and climate change at the forefront of discussions and decisions about how best to deal with a post-COVID regulatory landscape.
In September 2020, SIF joined the Informal Working Group (IWG) of the Task Force on Nature-related Financial Disclosures (TNFD).
The SIF Chair, Geoff Summerhayes participated in the UNEP Finance Initiative (UNEP FI) Global RoundTable (recording here), which took place on 13-14 October 2020 and explored the role of regulators in delivering a sustainable financial system. The SIF Chair, Geoff Summerhayes also participated in a session during Climate Finance Week Ireland (recording here), on 4 November 2020, where Stephen Nolan, Head of the SIF Secretariat delivered welcome remarks.
On 1 December 2020, the SIF held its Third Virtual Meeting (SIF VM3) and announced Anna Sweeney, Executive Director – Insurance, Bank of England as the new SIF Chair.
On 4 December 2020, the SIF Secretariat presented to the new NAIC Climate and Resiliency EX Task Force, at the virtual Fall National Meeting of NAIC (SIF member). The presentation deck can be viewed here and the meeting minutes here.
The SIF worked to support its members’ to mainstream climate and sustainability issues into supervisory practices.
During 2019, SIF members implemented a coordinated global survey on TCFD implementation by insurers in their markets. The objective of the survey was to gather information on levels of awareness, understanding, and action relating to the TCFD Recommendations by insurers.
Following on from work in 2018, SIF members applied a Question Bank to strengthen the examination of how regulated entities are responding to climate change risks and opportunities. The Question Bank provided a framework, and offered sample questions which supervisors could adapt for use in their own jurisdictions. The SIF also engaged with the NGFS to explore how the Question Bank’s mainstreaming of climate risk in supervisory practices could be applied to other sectors such as banking.
The SIF worked with the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) and in November 2019, published an FSI Insights paper on insurance stress testing and climate change risks. The paper compared risk quantification requirements that insurance regulators impose on insurers in relation to climate change risks; and reviewed how insurance supervisors quantify such risks themselves.
During 2018, the SIF focused its efforts on climate-related issues, culminating with the release of a joint SIF/IAIS ‘Issues Paper on Climate Change Risks to the Insurance Sector’. The first analysis of climate change risk by an international financial standards authority, the paper provides an overview of how climate change is affecting the insurance sector now and how it might in the future. It includes examples of current material risks and impacts across underwriting and investment activities, and describes how these risks and impacts may be of relevance for the supervision and regulation of the sector. The paper is ground-breaking in confirming that climate risks warrant “ongoing and intensifying scrutiny” by supervisors.
In addition, the SIF worked internally to develop practical tools to support supervisors’ efforts to consider climate change risks in everyday supervision. This included the development of shared resources for use across a range of on- and off-site supervisory engagements, and other non-standard activities (i.e. surveys, research reports).
The SIF conducted a range of collaborative and bilateral engagements relating to sustainability issues.
The SIF delivered a formal response to the public consultation on the Recommendations of the Financial Stability Board Task Force on Climate-Related Financial Disclosures in February 2017, and released a joint statement welcoming the final recommendations and guidance of the TCFD in July 2017, highlighting key areas where supervisors play a role in supporting uptake by the insurance sector.
The SIF Secretariat worked with Morocco’s insurance supervisor to implement a national roadmap for sustainable finance into the insurance sector, drawing on international best practices and supporting a convening of national stakeholders.
The SIF facilitated a survey and knowledge sharing programme on methodologies and approaches to assessing climate-related risks to insurance firms, including stress testing and scenario analysis of investment portfolios.