IAG joins global pilot for insurance industry climate risk disclosure
The pilot group will develop analytical tools that they will use to pioneer insurance industry climate risk disclosures that are in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). This will require them to make use of the latest climate science, including some of the most advanced, forward-looking climate scenarios available.
“For generations, the insurance industry has served as society’s early warning system and risk manager by understanding, reducing, pricing and carrying risk. Its message now is loud and clear: climate change risk is intensifying and is a serious threat to the insurability of communities and economies around the world,” said UN Environment chief, Erik Solheim.
“An uninsurable world is a price that society could not afford. This is why UN Environment is working with leading insurers to understand and reduce risk, to seize unprecedented business opportunities in climate action, and to ensure an insurable, resilient and sustainable world.”
The recent report of the Intergovernmental Panel on Climate Change (IPCC) highlights the rapid, far-reaching and unprecedented changes needed to limit global warming to 1.5°C. As rising temperatures accelerate sea level rise and catalyse extreme weather events, communities, businesses, cities and countries are facing new types and higher levels of risk.
The Financial Stability Board, chaired by Bank of England Governor Mark Carney, mandated its Task Force to develop voluntary and consistent climate-related financial disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The Task Force’s final recommendations were submitted to the G20 in June 2017 and have four key pillars—governance, strategy, risk management, and metrics and targets.
The tools and indicators that will be jointly developed and piloted by the Insurer Group will incorporate the latest scenario analysis to assess climate-related physical and transition risks in insurance portfolios. Insurance coverage incentivises risk reduction, puts a price tag on risk, de-risks investments, and serves as a financial shock absorber for communities, businesses and governments.
While insurers are also major investors—with global assets under management of over USD 30 trillion—this initiative will focus on the assessment of climate risks in their core insurance portfolios and products.
"The more insurers understand climate risks facing the economy, the more they can make prudent decisions in managing risk and serving their clients, and the more efficient and stable our markets will become,” said Michael Bloomberg, Chair of the Task Force and UN Special Envoy for Climate Action.
“The pioneering work of this group will pave the way for greater climate risk transparency and climate action by the global insurance industry, and it's great to see that it's consistent with our Task Force's recommendations."
Reliable information on insurers’ exposure to climate risks will strengthen the stability of the financial system, encourage more and better disclosures from client companies across sectors, and help boost insurance products and investments needed to transition to low-carbon, climate-resilient communities and economies.
The Insurer Group’s work follows equivalent work by leading banks and investors, all convened by UNEP FI for the purpose of advancing financial sector know-how on climate change and the adoption of the Task Force’s recommendations.
Its outputs aim to support key platforms and initiatives, including the UN Secretary-General’s Climate Summit in New York in September next year to drive ambitious climate action needed to achieve the goals of the Paris Agreement on Climate Change.
IAG Group CEO Peter Harmer emphasised the importance of global collaboration to establish the framework.
“The insurance industry has long understood the risk of climate change on our communities and customers, and it is vital that the financial sector works collectively to share our knowledge and create a framework for transparent and sustainable operations and reporting,” Mr Harmer said.
“We look forward to working with our global industry peers in the UNEP FI PSI pilot, and contributing to the development of a set of standards to give investors and customers the ability to make informed decisions in the context of what IAG and our industry are doing to help combat climate change.”
Member companies of the Insurer Group
The leading insurers that will work together with the UN are all signatories to UNEP FI’s Principles for Sustainable Insurance (PSI), a global best-practice sustainability framework and the largest collaborative initiative between the UN and the insurance industry.The Insurer Group includes: Allianz (Germany), AXA (France), IAG (Australia), Intact Financial Corporation (Canada), Länsförsäkringar Sak (Sweden), MAPFRE (Spain), MS&AD (Japan), Munich Re (Germany), NN Group (Netherlands), QBE (Australia), Sompo Japan Nipponkoa (Japan), Storebrand (Norway), Swiss Re (Switzerland), TD Insurance (Canada), The Co-operators (Canada), and Tokio Marine & Nichido (Japan).
About UN Environment Finance Initiative (UNEP FI)
The UN Environment Finance Initiative is a partnership between UN Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. Over 200 financial institutions, including banks, insurers and investors, work with UN Environment to understand today's environmental challenges, why they matter to finance, and how to actively participate in addressing them.
About UN Environment’s Principles for Sustainable Insurance Initiative (PSI)
Endorsed by the UN Secretary-General and insurance industry CEOs, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities—and a global initiative to strengthen the insurance industry’s contribution as risk managers, insurers and investors to building resilient, inclusive and sustainable communities and economies. Developed by UN Environment Finance Initiative, the PSI was launched at the 2012 UN Conference on Sustainable Development, and is the largest collaborative initiative between the UN and the insurance industry.