Finance
This sector relates to the following sub-sectors: Asset Managers, Asset Owners, Banks, Insurance
Insurance
Each section below relates to the TPT Disclosure Framework principles of Action and Accountability. The below provides further guidance for sub-elements 4.2 and 4.3. The TPT welcomes comments on this guidance to ensure it is as useful as possible for preparers and users. The text is open for comment until Friday, 24 November. Please select the feedback form at the bottom of the page. The final text will be updated in February.
This sub-sector covers insurers and re-insurers. The insurance industry provides both traditional and non-traditional insurance-related products. Traditional policy lines include property, life, casualty, and reinsurance. Non-traditional products include annuities, alternative risk transfers, and financial guarantees.
1. Policies and conditions for priority sectors and activities3, 4, 5, 6
- implement policies and conditions for insurability of high impact sectors like thermal coal, oil and gas, and deforestation;
- establish guidelines on insurability for high-risk sectors impacted by climate change (e.g., coastal real estate);
- introduce policies to incentivise climate-positive behaviour, for instance with motor insurance rewarding low-GHG emissions driving patterns (e.g., lower mileage and steadier/slower speed; and
- set standards and conditions for ongoing business engagement, ensuring alignment with climate objectives.
2. Claims management5, 6, 9, 14
- increase the proportion of claims management suppliers (e.g., suppliers that assess damages, repair them, or provide replacements) with approved Science Based Targets or credible transition plans;
- enhance efficiency of processes of suppliers (e.g., using 3D scanning and other advances to create image of damage on site); and
- encourage the use of repair over replace in non-safety critical repairs.
3. Changing products and services4, 5, 6, 11
- underwrite and offer insurance/reinsurance for low/near-zero carbon infrastructure, technologies, services, and nature-based solutions;
- develop models that account for climate risk in the pricing and underwriting of polices; and
- support nature-based flood and weather defences to help prevention as a claims management strategy.
4. Engagement with clients and customers3, 5, 6, 7, 8 , 12
- share climate-risk data with customers to help them understand their climate-risk and opportunities.
- share of clients in a re/insurer’s portfolio who have set their own science-based targets (SBTs);8
- share of clients in a re/insurer’s portfolio who have transition plans and decarbonisation strategies; 8
- measure number of clients/policy- holders covered by the engagement;8
- number of client engagements where the clients net zero relevant information was requested/provided;8
- number of clients which have set specific carbon reduction objectives. Members should specify an expected date by which the objective should be met (e.g., 3 years), thus adding a binding deadline. The member should also specify the course of action if the client fails to achieve the desired purpose;8
- aggregated risk exposure to weather-related catastrophes of their property business (i.e., annual aggregated expected losses from weather-related catastrophes) by relevant jurisdiction;12
- exposure to carbon-related assets by sector (as % portfolio/ underwriting activity);3
- transition risk heatmap by sector/technology/ geography;3
- physical risk heatmap by sector/geography;3
- exposure to climate-related opportunities (as % overall portfolio/ underwriting activity);14
- carbon return metric (e.g. avoided emissions);3
- amount, number, or proportion, of clients or portfolio companies included in climate-related engagement activities;3
- amount, number, or proportion of portfolio covered by key policies and conditions on topics such as coal, oil and gas, and deforestation;3
- amount, number, or proportion of products and services that are aligned to the net zero transition plan;3
- collaboration activities with insurance sector policy setters to address shared challenges;3
- outcomes, such as percentage of climate-related engagements that led to a material positive change such as increase in verification of net zero targets using metrics like a binary target measurement3; and
- number of function specific training sessions including, underwriters, investment managers and intermediary managers (broker relationships).3
- GHG metrics should include:3, 8, 10, 11, 12, 13, 14
- emissions associated with commercial lines portfolios, including, but not limited to property, liability/casualty, commercial motor, marine, aviation, agriculture, trade credit, engineering lines (excluding construction all-risk, erection all-risk);
- emissions associated with personal motor portfolios (private-use vehicles);
- emissions from other sources in line with developing insurance associated emission frameworks; and
- percentage of residual emissions compensated for using high-quality carbon credits by type.
Insurance literature
- Climate Financial Risk Forum (CFRF), CFRF Guide 2023: Climate Disclosures Dashboard 2.0, 2023
- Climate Institute for Sustainable Leadership (CISL) & Deloitte, Climate product innovation within the insurance sector, 2021
- Glasgow Finance Alliance for Net Zero (GFANZ), Financial Institution Net-zero Transition Plans Supplementary Information, 2022
- Glasgow Finance Alliance for Net Zero (GFANZ), Measuring Portfolio Alignment: Driving Enhancement, Convergence, and Adoption, 2022
- Glasgow Finance Alliance for Net Zero (GFANZ), Recommendations and Guidance of Financial Institution Net-zero Transition Plans, 2022
- Glasgow Finance Alliance for Net Zero (GFANZ), The Managed Phaseout of High-emitting Assets, 2022
- Jarzabkowski, P., K. Chalkias, D. Clarke, E. Iyahen, D. Stadtmueller & A. Zwick, Insurance for climate adaptation: Opportunities and limitations (Rotterdam and Washington, DC), 2019
- Net-Zero Insurance Alliance, NZIA Target Setting Protocol, 2023
- Paris Aligned Investment Initiative (PAII), Net Zero Investment Framework Implementation Guide, 2021
- Paris Aligned Investment Initiative (PAII), Net Zero Investment Framework Implementation Guide, 2021
- Partnership for Carbon Accounting Financials (PCAF), Global GHG Accounting and Reporting Standard for the Insurance Industry Progress Report, 2022
- Science Based Targets Initiative (SBTi), SBTi Corporate Net-Zero Standard ,2021
- Science Based Targets Initiative (SBTi), Financial Sector Science-based Targets Guidance, 2022
- Science Based Targets Initiative (SBTi), Foundations for Science-based Net-zero Target Setting in the Financial Sector ,2022
- Taskforce on Climate-Related Financial Disclosures (TCFD), Metrics and Targets, 2022
Your feedback
The TPT welcomes comments on the Sector Summary to ensure it is as useful as possible for preparers and users. The Sector Summary was open for comment until Friday 24 November and, following consideration of the feedback received, will be updated in February. Thank you to the industry experts who provided comments.
