Regulatory risks: climate change
In view of the strategic importance climate change has for our core business, we closely monitor related regulatory developments. Governments’ and regulators’ interest in climate change and natural catastrophes has continued to build, leading to an increase in climate-related reporting requirements.
In the US, for example, several state insurance regulators are evaluating the impacts of climate change on re/insurers, including through insurer surveys. The State of California even requires insurers to disclose investments in fossil fuels and is asking them to divest voluntarily from thermal coal concerns. In Europe, certain EU insurance supervisors, including the UK’s Prudential Regulation Authority (www.bankofengland.co.uk/pra), are examining the impact of climate change on insurer underwriting and investment risks.
Such initiatives form part of a wider effort by public-sector bodies to integrate sustainable development criteria into the financial system. Recent examples include the G20’s proposal to establish a Green Finance Study Group and the EU’s announcement to develop a strategy on sustainable finance.
Reflecting governments’ growing concern over the implications of climate change, the Financial Stability Board (FSB) has recently established a Task Force on Climate-related Financial Disclosures, TCFD (www.fsb-tcfd.org). The FSB is an international body that monitors and makes recommendations about the global financial system, coordinating national financial authorities and international standard-setting bodies.
Starting from the premise that climate change creates physical, liability and transition risks, the TCFD aims to develop consistent and effective financial disclosures that will allow stakeholders to properly assess the climate risks faced by companies and to take appropriate action. In 2016, the task force published its Phase 1 report for public consultation. After processing the inputs received from key stakeholders, it launched its “Recommended disclosures” in December 2016. Swiss Re supports the work of the task force and has been providing one of its members since its launch. We have started to integrate the recommended disclosures in our 2016 Financial Report.
We were also present at the launch event of the Sustainable Insurance Forum for Supervisors, held by the California Department for Insurance and the UN Environment Programme. The Forum’s goal is to promote cooperation on critical sustainable insurance challenges, such as climate change. Increasingly, insurance regulators and supervisors are exploring how these factors impact upon their goals of ensuring the safety, soundness and accountability of the sector. For the first time, the Forum provides them with an international platform to share experience and explore common approaches.