Climate change risk management for insurers

Integration of Climate Change Risk in the ORSA and Risk Management Framework

Finalyse supported the client with integrating climate change risk in their ORSA and risk management framework. This included performing a materiality assessment and setting a baseline scenario narrative, with the following key deliverables:

• Assessing the As-Is situation by investigating the progress made with regards to climate change risk management.
• Hosting a series of training sessions for the risk management and sustainability teams at each step of the project.
• Developing a framework for climate change risk management allowing the client to revisit and update the materiality assessments and scenarios in future.
• Development and support with the execution of the risk identification and climate risk mapping processes.
• Performing a materiality assessment for identified risks and documenting the justifications.
• Providing support with defining climate change scenarios to be used in the ORSA projections.
• Providing market insights and benchmarking on climate change risk ORSA treatments, as well as providing insights from our dealings with EIOPA and local regulators.
• Documentation of key decisions and updating relevant policies and procedures.

Following our successful project with the cleint in 2023 to integrate climate change risk into the risk management framework, Finalyse is currently supporting them on a further project to expand on and enhance the approach.

• Setting a strategy for enhancing the climate change risk management approach, for management approval.
• Developing a roadmap to implement the newly-defined strategy.
• Defining a climate change risk appetite with metrics, targets and limits, and building this into the Risk Appetite Statement.
• Establishing a process for the regular monitoring and reporting of the metrics, to ensure exposures are within the risk appetite and for management information.

Finalyse was engaged by Belfius Insurance, a Belgian insurer selling both life and non-life contracts nationally, to perform a review of their approach to climate change risk assessment. The assessment included the following steps:

• Performing a gap analysis versus the EIOPA and National Bank Belgium guidance.
• Proposing a roadmap to enhance the existing approach, along with suggested external data and tools that would be suitable for analysing the portfolio.
• Presenting the findings of the gap analysis and the suggested enhancements to senior management.

Finalyse supported the cleint in Belgium with their ESG disclosures for the Key Information Documents of some of their insurance products.

Finalyse assessed the information that was provided by the client in their Key Information Documents for their unit-linked life insurance products in light of the SFDR (Sustainable Financial Disclosures Regulation). This involved labelling the assets underlying these products into “light-green” funds, “dark green” funds and those that do not fall into either of these categories.

Finalyse supported the client with the regulatory requirements in terms of incorporating climate change risk. The project involved the following:

• Presentation of key climate change regulatory requirements from EIOPA and BMA to the management committee.
• Preparation of a roadmap for achieving compliance with these regulations.
• Hosting a training session for the group risk management team.