New paper sets out recommendations to promote a globally consistent approach to the supervision of climate-related risks in the insurance sector.
The IAIS (International Association of Insurance Supervisors) has published a new paper providing recommendations for insurance supervisors to strengthen efforts to address climate-related risks.
The paper was published in partnership with the United Nations-convened SIF (Sustainable Insurance Forum).
“Climate-related risks are material for the insurance sector as they impact the insurability of policyholder property and assets as well as insurers’ operations and investments,” the paper says. “Therefore, supervisors should identify, monitor, assess and contribute to the mitigation of the risks from climate change to the insurance sector.”
Besides the challenges, the paper notes that climate change also presents opportunities for the insurance sector, given its ability to serve as an assessor, manager and carrier of risk, as well as an investor. Insurers are also “uniquely qualified” to understand the pricing of risks, it says.
The paper sets out recommendations and examples of good practice, consistent with the Insurance Core Principles (ICPs), as part of efforts to promote a globally consistent approach to the supervision of climate-related risks in the insurance sector.
The recommendations cover:
- Expectations on the role of supervisors to assess the relevance of climate-related risks to their supervisory objectives, and collect data from insurers on their exposure to, and management of, the risks of climate change
- Expectations for insurers to integrate climate-related risks into overall corporate governance frameworks and ensure appropriate resources and expertise to manage the risks
- Expectations for insurers to include climate-related risks in the ORSA (Own Risk and Solvency Assessment) and adopt the appropriate risk management actions to mitigate any identified risks
- Expectations for insurers to assess climate-related impacts on their investment portfolios and asset-liability management, including through the use of scenario analysis to gain a better understanding of the risks
- Expectations for insurers to disclose material climate-related risks in line with ICP 20 (Public Disclosure), and for supervisors to use the TCFD framework when designing best practices and objectives.
The paper aims to support supervisors in their efforts to integrate climate risk considerations into the supervision of the insurance sector.
The full paper is available here.
A public webinar will be held on 9 June to provide more background on the paper and allow for a Q&A session.
The IAIS and SIF plan to publish a report in the coming months which will include an analysis of the investment exposures of insurers to climate change.