Climate change is the biggest risk multiplier facing the world today

​As purveyors and managers of risk, insurers are at the forefront of this challenge. As an integral part of the global ecosystem, insurers also have opportunity to engage with a wide variety of counterparties (such as, investees, insureds, and suppliers) to influence change and drive more sustainable business practices across industries.

Consequently, the journey to Net Zero requires support and effort from all parts of the insurance enterprise: investing, underwriting, operations, reporting and risk management. As such, it is essential insurers adopt a holistic, consistent, integrated risk assessment approach to climate risk that touches all parts of their business.


Podcasts

Moody's Analytics and The Actuary: Exploring climate change modeling for insurers

In a series of three podcasts, we are joined by experts from Moody’s and other industry specialists to explore the impact of climate change on risk modeling. We address the expectations and challenges of performing adequate analysis on both assets and liabilities, and the practical applications. Finally, we generate some thought-provoking discussion on whether insurers are missing some important risk factors in their analysis.

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Climate scenario analysis for the insurance sector

The industry is still in the early stages of its climate scenario development and it has become a priority for many insurers to start to understand and develop best practices. But where do you start? Our podcast series are dedicated to understanding climate scenario modeling, the different approaches and developing regulations.

Whitepapers & Reports

Translating long-term climate scenarios to short-term market stresses

This paper discusses the ways that standard climate scenarios, like those produced by the Network for Greening the Financial System (NGFS), can be used to create short-term stresses for financial markets.

Climate Risk for Insurers Whitepaper Series

Moody's Analytics thought leadership series on climate risk, helps insurers prepare for the broad set of challenges that climate risk imposes. A series of six free, short and easy to digest papers.

Industry Survey: How prepared are life insurers for including climate risk modeling into their risk assessment and management processes?

Download our industry survey report to find out.

Financial Impact of Climate Risk - Scenario Analysis

Understanding the financial impact of climate risk

Climate Scenario Analysis is challenging. Insurers need an approach to scenarios which addresses the complexity and uniqueness of their business model.

 Moody's Analytics has extensive expertise of scenario modeling and deep domain knowledge of the insurance market and climate risk. Enabling a range of solutions to be offered.


The Climate Pathway Scenario Service

Translates climate pathways into financial risk variables to power insurers’ asset and liability projections to support quantification of the financial impact from physical and transitional risk


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Climate-Adjusted Credit Risk Insights & Alerts


Leverage world-class credit risk data and early warning signals to better assess the potential impact of physical and transitional climate risk on your credit portfolio.

 

Other Related Solutions

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ESG Insurance Underwriting

Integrates indicators and scores to help Commercial P&C insurers operationalize environmental, social, and governance (ESG) risk assessment in their insurance underwriting workflows.

 

 

Liferisks
LifeRisks®

Cloud-based software that delivers the models and data to perform portfolio-specific analytics to manage extreme mortality and longevity risk.

 

 

 

 

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Climate on Demand

Provides foundational insight through rigorous data and analytics that define current and forward-looking location-specific threats to real assets from climate-related event damages and business disruption.


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Net Zero Underwriting Module

Provides (re)insurers with a detailed understanding of the greenhouse gas (GHG) emissions associated with their insurance underwriting portfolios.

 



Investment Strategy

As asset owners and managers, insurance companies have historically incorporated a number of ESG factors (most notably governance concerns) into their investment and portfolio management operations. Insurers are continually looking at new performance and benchmark metrics to understand the climate impact on their portfolios.

Typical challenges are:

  • Assessing the impact on a current portfolio in terms of financial impact, temperature alignment, carbon emissions and the potential for stranded assets
  • Designing a strategy to meet net zero temperature alignment
  • Implementing climate-aware strategic asset allocation
  • Screening investment selection for climate and ESG risks

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Risk Strategy

Climate risk requires insurers to manage a range of emerging risks that will directly and indirectly impact the business and ensure they can monitor these risks across all facets of their business operations. Most notably, this would include their underwriting, investment and supply chain management operations. Insurers are currently focusing their efforts to apply a holistic approach to data and methodology to assess ESG risk performance in order to maintain consistency across the organization.


Typical challenges are:

  • Identifying physical and transition risk exposures on assets and liabilities
  • Translating climate risk into financial variables to measure financial impact (such as, market, credit, liquidity and insurance risks)
  • Assessing reputational, liquidity and operational risks
  • Developing mitigation plans
  • Monitoring climate and ESG risk on assets and liabilities
Regulatory Reporting and Disclosures

Insurers are under increasing pressure from multiple stakeholders to address sustainability issues, not least from investors, lenders and regulators for financial disclosures to better understand their resiliency. The Task Force on Climate-Related Disclosure (TCFD) is becoming a global standard for reporting and increasingly many jurisdictions are switching from voluntary to mandatory disclosures. Many regulators are now issuing guidelines to insurers about their expectations for financial disclosure and intend to switch from a supporting to supervisory role over the next 2-3 years.

 

Typical challenges are:

  • Undertaking regulatory stress testing, for example, CBES
  • Addressing scenario analysis recommendations of the TCFD
  • Integrating climate risks into the ORSA
  • Supporting compliance with EU Taxonomy and SFDR
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Announcements
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Learn More About Climate Risk for Insurers

Speak to our team of experts to learn more and discuss how Moody's Analytics can help with your


  • Climate Scenario Analysis
  • Underwriting Strategy 
  • Investment Strategy
  • Risk Strategy
  • Regulatory Reporting and Disclosures