Re/insurers are experiencing more scrutiny and pressure than ever before to comply with a myriad of new climate change-related standards, frameworks and reporting requirements. Ultimately, it is positive for the industry and the communities around the world in which they do business, says Pro Global Head of Insurance Services Richard Emmett.
There have been clear policy signals globally for some time now that climate and environmental related impact reporting is rising up the regulatory agenda. Different governments are moving at different paces, but November’s COP26 conference in Glasgow, UK, was a clear focus point and call to action for all.
Just ahead of COP26, the UK government announced it would enshrine mandatory climate disclosures for the largest companies into law. Firms will be required to disclose climate-related financial information, ensuring they consider the risks and opportunities they face as a result of climate change.
It is likely that other regulatory authorities will follow suit, while rating agencies are also actively exploring how best to analyse climate change in their rating assessments, especially those that assess investments in fossil fuels.
At the same time, re/insurers themselves are responding to pressure to play their part in accelerating the transition to net-zero emission economies by shifting their underwriting portfolios away from carbon intensive industries. A key initiative gaining momentum here is the UN-convened Net-Zero Insurance Alliance (NZIA), which at the time of writing brings together 15 of the world’s leading insurers and reinsurers to commit to individually transition their underwriting portfolios to net-zero greenhouse gas emissions by 2050.
However, Fitch Ratings has warned that enhanced climate risk disclosure will challenge some corporations due to limited and inconsistent knowledge of environmental issues and how standards can be implemented across an organisation, tracked and reported on.
In addition, the International Financial Reporting Standards Foundation Trustees announced during COP26 the creation of the International Sustainability Standards Board with a vision to achieve consistent and global climate impact reporting standards. This will be critical in helping corporations and stakeholders consistently navigate the current myriad of sustainability standards, frameworks and metrics.
Whether they be mandatory reporting or voluntary initiatives, it is clear that much still needs to be done to achieve consistent, global standards for assessing and reporting on climate vulnerability and risk associated with the transition to a low-carbon economy.
But what is clear is that the re/insurance sector as well as its regulatory authorities, investors, shareholders and other stakeholders are energised and focussed on their responsibilities when it comes to climate change. It is no longer an issue that is up for debate or one that companies can gloss over or ignore.
There is much scrutiny and absolutely no room for greenwashing – and standing still is not an option for any re/insurer. Increased regulation, more sophisticated and demanding consumers and the simple humanitarian imperative to transition to net-zero mean that many re/insurers need to change how they operate, while still delivering value consistently in a challenging and constantly changing environment.
Getting methodologies in place
It is critical therefore to work with a partner who can combine subject matter expertise with deep methodology knowledge and business transformation skills, to help re/insurers deliver tangible and sustainable results, and to be able to independently verify their efforts.
Our consultants are highly experienced insurance practitioners who can work across your organisation, with your staff and within your teams for all your project and change requirements. Our specialist teams provide a complete range of insurance and underwriting support services, together with audit and risk assessment services across the entire insurance value chain.
As one of the largest providers of audit services to the Lloyd’s and Company markets, our team has practical experience in underwriting, technical accounting / finance, claims adjusting, IT and compliance.
Working together we can achieve the ambitious goals set during COP26 and beyond. We are committed to helping re/insurers comply with climate change reporting standards as they come on board, and accurately and independently verify their efforts and achievements.