Industry think tank The Geneva Association has mobilised 17 of the world’s largest P&C and life re/insurers to form a new task force for tackling climate risk.
These companies will come together to develop climate risk assessment methodologies and tools for the re/insurance industry, beginning with a report that lays out a holistic decision-making framework.
Companies represented on the task force include Achmea, Aegon, AIG, Allianz, Aviva, AXA, Chubb, Daichi Life, Hannover Re, Intact Financial, Manulife, MetLife, Munich Re, Prudential Financial, SCOR, Swiss Re, Tokio Marine.
The first report of the task force presents key climate risk considerations for both the liability and asset sides of the balance sheet, taking into consideration physical and transition risks from climate change by line of business.
The Geneva Assocation says the analysis will offers a foundation for the task force to drive further developments in this space.
“Climate risk assessment requires qualitative and quantitative approaches over short- and long-term time horizons and must account for uncertainties associated with transitioning,” the Association explained. “Knowledge sharing across companies and with other stakeholders is critical to raising risk awareness and leveraging all available expertise.”
Going forward, the task force will be engaging with regulators, supervisors, rating agencies and the scientific community to identify the most appropriate approaches.
“In 2020 alone, the world witnessed massive wildfires in California and Australia, historic floods in China and a record hurricane season in the Atlantic,” said Jad Ariss, Geneva Association Managing Director.
“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.”
Maryam Golnaraghi, Director Climate Change and Emerging Environmental Topics and project leader, also 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 task force 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 (TCFD).”
Golnaraghi added: “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.”