Our market review shows that there is much work to be done by firms in addressing climate change risk.
Best practice is still evolving and there are many challenges facing insurers. The key is knowing how best to target your efforts, as well as having a clear longer-term roadmap.
In this report, we present the findings of our market review on climate change risk for non-life insurers that we carried out in September 2021. 31 firms that took part in our review, representing a wide range of classes, territories and areas of operation, as well as a good spread of smaller and larger firms.
There is a lot to learn from others in the market and the results of our review will help you benchmark your firm’s response to climate change risk against that of your peers.
- 40% of boards have had no climate change risk training. Of these, fewer than half have training planned.
- 60% of respondents have started to use metrics for monitoring climate change risk.
- 55% of respondents are not yet making an explicit allowance for climate change risk in their capital calculations, pricing, underwriting or reserving.
- 42% of respondents have not yet considered short-term climate change scenarios and 65% have not considered long-term scenarios.
- 97% of respondents mention climate change risk in their ORSA. More than 40% have also included it in their annual reports and their SFCR.
Climate change risk management was highlighted in the PRA’s July 2020 Dear CEO letter as a key area needing improvement. Despite that, we found that most firms’ responses remain very much a work in progress. This lack of progress may prompt more intervention and rule setting from regulators. This would be a missed opportunity for the climate change response to be industry-led, rather than regulator-led.
How we can help
We work with insurers to help them better understand and manage the risks they face and their capital requirements.
We help organisations to unlock business value from their Solvency II processes.
We provide an alternative, external view on the best estimate level of reserves for insurers and also help them understand the key drivers of variability around that best estimate.
LCP InsurSight is an analytics and automated trend identification tool for general insurance companies.
We help our insurance clients to develop strong links between their strategy, capital management and risk management processes, improving their chances of business success.
Our business-focused approach to validation can help you be confident that your insurance models are robust, and that you are meeting regulatory requirements.