Global insurer taskforce to develop climate risk assessment methodologies

Climate change poses different levels of physical and transition risks to both sides of the balance sheet, as well as liabilities and assets for both P&C and life re/insurers, according to a new report, Climate Risk Assessment for the Insurance Industry, from the Geneva Association. The report is the first from the newly launched Geneva Association Task Force, which sees global insurers unite to tackle climate risk. The taskforce comprises experts from 17 of the world’s largest P&C and life insurers, and will develop and hone climate risk assessment methodologies and tools for the insurance industry. “The report presents an integrated decision-making framework for climate risk assessment that considers four dimensions: 1) business line (P&C versus life); 2) side of the balance sheet (assets versus liabilities); 3) time horizon (short/medium versus long term); and 4) type of risk (physical and transition). The report sets the stage for the taskforce to drive innovations in this space,” said the Geneva Association. It explained that the taskforce will be engaging with regulators, supervisors, ratings agencies and the scientific community to identify the most appropriate approaches. According to the report: “Climate risk assessment requires qualitative and quantitative approaches over short- and long-term time horizons and must account for uncertainties associated with transitioning. Knowledge sharing across companies and with other stakeholders is critical to raising risk awareness and leveraging all available expertise.” Jad Ariss, Geneva Association managing director, commented: “In 2020 alone, the world witnessed massive wildfires in California and Australia, historic floods in China and a record hurricane season in the Atlantic. The societal impacts of climate change have become ubiquitous, and individuals and institutions must fully commit now to confronting the climate crisis. Insurers are obvious, strong leaders on global climate action, given their core functions – managing risk and investing – and our industry-led initiative demonstrates that they are proactively rising to the occasion.” The report finds that despite some actions by stakeholder groups, initiatives remain fragmented and considerable work lies ahead because of the quickly evolving nature of climate science as well as other factors that will influence transition efforts. It concludes: “The results of re/insurers’ research, risk modelling, underwriting and investments could not only complement but also inform the broader actions that are needed by governments, policymakers, regulators, corporations and society as a whole.” Maryam Golnaraghi, director, climate change and emerging environmental topics and project leader, commented: “This initiative is taking the insurance industry’s climate action and collaboration to the next level. Building on lessons learned from previous pilots and initiatives, our taskforce is focused on advancing climate risk assessment and scenario analysis anchored in companies’ decision-making, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures. Our first report lays the foundation for us to design and test methodologies and tools – in collaboration with regulators and the scientific community – to converge on robust solutions for P&C and life insurers.” The global re/insurance companies represented on the taskforce are: Achmea, Aegon, AIG, Allianz, Aviva, AXA, Chubb, Daichi Life, Hannover Re, Intact Financial, Manulife, MetLife, Munich Re, Prudential Financial, SCOR, Swiss Re and Tokio Marine.

Global insurer taskforce to develop climate risk assessment methodologies

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