Insuring the climate transition - Finance Initiative

1 Insuring the climate transitionThe final report on the project of UN Environment Programme s Principles for Sustainable Insurance Initiative to pilot the TCFD recommendationsJanuary 2021 Insuring the climate transitionEnhancing the insurance industry s assessment of climate change futuresPublished by UNEP s Principles for Sustainable Insurance Initiative in January 2021 Copyright United Nations Environment Programme, 2021 This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes with-out special permission from the copyright holder, provided acknowledgement of the source is made.

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4 IvAcknowledgements ..vForeword ..1 Executive summary ..2 Scope of the study ..2 Forward-looking climate change scenarios ..3 Observations by risk category ..4 Future opportunities ..71. Introduction: climate change financial risk categories and the need for an integrated approach ..82. The approach to physical risk assessment .. Define scope of analysis .. Define impact pathways .. Obtain climate data .. Develop modelling approach .. Construct and test model .. Key takeaways ..423. The approach to transition risk assessment .. Define scope of analysis.

5 Define impact pathways .. Obtain climate data .. Develop modelling approach .. Construct and test model .. Key takeaways ..724. The approach to litigation risk assessment .. Definition of litigation risk .. Stress testing approach .. Risk assessment methodology .. Key takeaways ..885. Conclusions ..89 Annex 1: The Principles for Sustainable Insurance ..91 Annex 2: Summary of key cases/areas of concern for private sector defendants ..93 Principles for Sustainable InsuranceivAbout UN Environment Programme s Principles for Sustainable Insurance InitiativeEndorsed by the UN Secretary-General and insurance industry CEOs, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance (ESG)

6 Risks and opportunities and a global Initiative to strengthen the insurance industry s contribution as risk managers, insurers and investors to building resilient, inclusive and sustainable communities and economies on a healthy by UN Environment Programme s Finance Initiative , the PSI was launched at the 2012 UN Conference on Sustainable Development (Rio+20) and has led to the largest collab-orative Initiative between the UN and the insurance vision of the PSI Initiative is of a risk-aware world, where the insurance industry is trusted and plays its full role in enabling a healthy, safe, resilient and sustainable society.

7 Its purpose is to better understand, prevent and reduce ESG risks, and to better manage opportunities to provide quality and reliable risk The Principles for Sustainable Insurance provide a global roadmap to develop and expand the innovative risk management and insurance solutions that we need to promote renewable energy, clean water, food security, sustainable cities and disaster-resilient communities. UN Secretary-General (June 2012) Insuring the climate transitionvAcknowledgementsUN Environment Programme s Principles for Sustainable Insurance Initiative (PSI) is indebted to each of the 22 lead-ing insurance and reinsurance companies worldwide and their respective representatives who formed part of the PSI TCFD pilot group and made this collaborative project possi-ble.

8 They contributed invaluable insights to this pioneering project by participating in numerous meetings, document reviews, and internal model testing. PSI TCFD pilot group members Allianz (Germany): Thomas Liesch, James Wallace Aviva (UK): Ben Carr, Zelda Bentham, Chris Boss, Bianca Hanscombe, Finn Clawson, Adrian Whitaker, Claire Vedrenne, Masani Panigrahi AXA (France): Suzanne Scatliffe, Tom Philp, Andrew MacFarlane, Owen Dacey, Sylvain Vanston Desjardins (Canada): J r me Petigny, Mathieu Francoeur, Barth l my Mahieu Generali (Italy): Alessandro Porta, Lucia Silva, Andrea Mosca, Marta Pagan IAG (Australia): Julie Batch, Ramana James, Mark Leplastrier, Brooke Pettit, Nicholas Stacher ICEA LION (Kenya).

9 Paul Muthaura, Dorothy Maseke, Martin Kariithi, Joy Omondi Intact (Canada): Dan Fedus, Jonathan Gadoury, Laura Willett, Mandy Dennison, Mark Yorsaner, Maxime Rousseau Turenne L nsf rs kringar Sak (Sweden): Carina Bodesand, Gertrud Henriksson, Julia Bergqvist, Jens Holmberg, Filip Ahlin, Stefan Schneider, Anders Nises, Ieva Gediminaite, Henrik Mel n Lloyds Banking Group (UK): Graeme Andress, Kevin Treco, Dimosthenis Tsaknias, Emily White MAPFRE (Spain): Jos . Ca izares Fern ndez, Miriam Garc a Reigosa, Sara Fern ndez Quintano, F lix Condes Novillo, Pablo Bohdan Maksymenko MS&AD (Japan): Yasumasa Kanie, Keita Uehara Munich Re (Germany): Philipp Hasenmueller, Renate Bleich, Eberhard Faust, Stephan Laemmle, Heike Markus, Ina Ebert, Julia Schubring-Giese NN (The Netherlands): Naomi Tronco, Sebastian Rath, Rayna Boxill, Shalabh Mathur, Fleur Hudig, Nathalie van Toren QBE (Australia).

10 Sharanjit Paddam, Serena Blanch, Sereina Pfister, Monica Dasgupta, Janette O Neill, Joan Cleary, Eric Letourneau, Carol Zacharias Sompo Japan (Japan): Yukio Hori, Kanako Murakami, Shinya Ishikawa Storebrand (Norway): Bart Bisschops, Peter Natas, Caroline Johansen Swiss Re (Switzlerand): Lasse Wallquist, Nora Ernst, Martin Weymann, Thierry Corti TD Insurance (Canada): Huma Pabani, Moira Gill, Frank Yang, Kris Bagchi, Patricia Therrien The Co-operators (Canada): Chad Park, Wendy Perkins, Eliot Gregoire, Barbara Turley-McIntyre Tokio Marine (Japan): Masaaki Nagamura, Hiroo Shimada Zurich (Switzerland).