The insurance industry has an array of data and expertise that can help it to uniquely understand climate risk. It can therefore play an important role in supporting the broader financial sector to fully understand, and respond to the physical, transition and liability risks associated with climate change. The objective is to identify how changes to the regulatory environment can empower insurance to support the transition to a zero carbon, climate-resilient economy more broadly across financial markets.
This regulatory research pillar is directly informed by the Insurance Advisory Council. The Council’s objective is to help strengthen insurance industry support for regulators, policymakers and other stakeholders as they consider how to promote more systematic responses to climate change across the financial system.
ClimateWise welcomes TCFD’s draft disclosure recommendations and calls for closer alignment across both sides of insurers’ balance sheets.
The ClimateWise membership of 29 global insurance organisations has responded positively to the recent publication of the Recommendations Report of the Financial Stability Board (FSB) Task Force on Climate-Related Financial Disclosures (TCFD). It aims to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. It considers the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. In December 2016, the TCFD published its recommendations for consultation that included supplemental guidance for a number of sectors, including insurance.
In 2015, ClimateWise collaborated with the Bank of England’s Prudential Regulation Authority (PRA) to help inform a ground-breaking study into the impacts of climate change for the insurance sector. This was the first example of a regulator globally examining such risks. Over a series of ClimateWise roundtables, the PRA engaged with insurance industry representatives, academics and other specialists to explore the nature of the physical, transition and liability risks covered by the report.
This study assesses the role insurance regulation should play in protecting the basic human rights of life, livelihood and shelter against natural hazards and climate risk. It found that effective insurance regulation greatly facilitates improved access to both traditional and alternative insurance cover. This, in turn, helps to increase the resilience of communities, fulfil the human rights objectives of both state and non-state actors and contributes to realising the UN Sustainable Development Goals more broadly.