A global survey of leading financial services regulators shows that “environmental responsibility” has now become one of the top eight priorities.
Research group The Geneva Association listed the eight current priorities: policyholder protection, insurer financial health, corporate governance and strategy, insurability/affordability of insurance solutions, financial stability, increasing risk awareness, addressing data/risk assessment services, and protecting the environment.
The Association’s Task Force on Risk Assessment of Climate Change for the Insurance Industry – which includes 53 experts from 18 insurance and reinsurance companies – notes that the development of global baseline standards for sustainability reporting is underway by the International Sustainability Standards Board.
“Mandatory official requirements for disclosure of the climate in the next few years are imminent,” says the association’s latest report. “In recent years, we have witnessed important regulatory developments related to climate change in many jurisdictions, with significant implications for companies’ efforts to assess and disclose the impact of climate change on their business models.
The report details regulators’ shared priorities and related issues for insurers, as well as strategic guidance on how “to embed climate change risk assessment into core business decision-making.”
According to them, insurers around the world are at different stages of assessing the impact of climate change risks on their business model, with different trends depending on the jurisdiction, industry and size of the company.
“While insurers across all lines of business have begun to examine the materiality of climate change risks on both sides of the balance sheet, more research is needed for life and health insurers in particular to assess the attribution and materiality of climate change to their underwriting risks over different time horizons,” states the report, which offers a 10-step template to help organizations develop business use cases.
Insurers and regulators still need to do more work to identify data gaps and develop analytical tools for forward-looking climate risk assessment, it said.
“Climate change risk assessment requires a company-wide mandate with clear accountability. Central to this process is the development of overarching decision-making issues that need to be addressed by the board and senior management.”
It also says that a “growing body of critics” are fueling the misalignment of net-zero promises with what companies can actually deliver, and the possibility of “greenwashing” leading to potential reputational and climate risks or even regulatory action could.
“Robust intra- and inter-sectoral collaboration is the only way to accelerate the development and convergence of best practices, sensible baseline requirements for decision-making climate change risk assessments, and disclosures that would enable cross-firm comparisons,” the report states.
“We recognize and deeply appreciate the growing proactive collaboration and engagement across the insurance industry and with key regulators and standard-setters in the financial sector.”