Climate Change: disclosures by UK life insurers

• The good news is that every firm recognised climate change as a risk (and often an opportunity).
• Two of the ten firms have separate, dedicated climate related reports in addition to statements in their annual reports.
• Two other firms reported following the recommended Task force on Climate-Related Financial Disclosures (TCFD) structure.

• As above, all of the companies include the consideration of climate change in their risk framework.
• Only one treats climate risk as a stand-alone risk; the remaining nine treat it as a cross-cutting risk that impacts other risks such as market or insurance risk.
• Interestingly, four of those reviewed still consider climate change related risk to be an emerging risk.

• Most of the companies reviewed disclosed that they include climate change scenarios in their Own Risk and Solvency Assessment (ORSA).
• Limited information is given on the scenarios used. Those disclosed included:
  • The Climate Change scenarios set out in the PRA Insurance Stress Test 2019;
  • Scenarios consistent with pathways based on the four Intergovernmental Panel on Climate Change (IPCC) scenarios;
  • Scenarios based on pathways consistent with Paris Agreement temperature scenarios.

In addition to managing the risks of climate change, a small number of the firms reviewed have set themselves goals to reduce their impact on the climate, either directly or in respect of their investments.  

• The most common goal is committing to investing in line with the Paris agreement (limiting global warming to 1.5°C). 
• A list of all metrics published are:
  • Portfolio carbon intensity
  • Operational carbon footprint
  • Greenhouse gas (GHG) emissions
  • MSCI ESG ratings vs benchmarks
  • Climate VaR
  • ND-GAIN index ratings vs benchmarks
  • Actual versus Expected weather related losses    

Interestingly, the responsibility for climate-related risks was considerably varied across the firms reviewed.

• For most companies the Chief Risk Officer (CRO) takes at least partial responsibility for climate risks. For three firms, the Chief Financial Officer (CFO) also takes some responsibility and for one firm, the Head of Asset Liability Management has specific responsibility.
• All firms have a clear committee or Board responsibility but again this varies by firm, depending on the governance structure of the firm.