Key points

  • Climate change is a high profile issue and a focus area for investors and regulators. The insurance industry is accustomed to reflecting the effects of assumptions about climate change in underwriting and reserving practices. However, reflecting the effects of climate change in risk disclosures is a less-familiar area.
  • This document outlines the factors for insurers to consider in providing disclosures about climate-related risks in financial statements.
  • For further details see below.
The impact of climate change is a high-profile issue and a key focus area for investors and regulators. There are two broad categories of risk: the first is the threat of exposure to the physical risks of climate change, such as severe weather events and the effects of rising temperatures. The second is the risk created by what many call the transitional impacts, i.e. the policy changes and economic consequences of efforts to decarbonise the economy. With respect to transitional risk, there is both a ‘top down’ impact - in the form of changes in legislation and policy - as well as a ‘bottom up’ shift in consumer preferences for low- or no-emissions products.
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