Published September 2020
Using hindsight and foresight: Enhancing the insurance industry’s assessment of climate change futures
Over the past eight months, 22 leading insurers and reinsurers from across the globe (“the pilot group”) have been collaborating under the auspices of UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI) to explore and pilot methodologies that insurers can use towards implementing the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD); with valuable advice to the pilot group and review by PwC and the Sabin Center for Climate Change Law. The TCFD recommendations are structured around four thematic areas that correspond to core operations of an organisation—governance, strategy, risk management, and metrics and targets. This study on insurance follows the TCFD studies done by UNEP Finance Initiative on banking and investment. This document discusses the overall approach and outlines the key insights so far. It serves as a prelude for the final report to be published by the end of 2020.
The overall aim of the pilot project is to contribute to the development of consistent and transparent analytical approaches that can be used to identify, assess and disclose climate change-related risks and opportunities in insurance portfolios in a forward-looking, scenario-based manner. Climate change risk assessment based on forward-looking information and climate change scenarios is a central component of the TCFD recommendations, and is arguably the most challenging to implement.