Sustainable Finance Market Update – Insurance Providers

Financial Centres for Sustainability (FC4S) is launching the fifth report of the Road to COP26 Sustainable Finance Market Update Series. This series of decks reviews the main market developments to mobilize green and sustainable finance and brings examples of supporting national and international guidance and regulations.

The fifth edition is about how the insurance sector has integrated ESG factors into its reporting, increasingly implemented risk management frameworks, and mobilized capital to meet global sustainability goals.

Highlights:

• Insurers are advancing in disclosing sustainability information according to global standards, such as SASB and GRI, and have also been increasingly applying the TCFD recommendations.
• Scenario analysis has emerged as a key method to understand climate risk and narrow the protection gap. However, its application in the insurance industry is still in early stages.
• Insurance can contribute to promote climate adaptation, restoration and the preservation of biodiversity, by enabling reliable disaster responses, and to improve preparedness, by increasing adaptive capacity.
• Innovative parametric insurance products allow for the preservation of valuable ecosystems.
• Insurance-Linked Securities (ILS) allow insurers to offload in capital markets the risk of the climate related insurance policies. Although still small (US$ 105 billion), annual issuance of ILS has more than doubled its size since 2015.

• Most recent regulatory requirements mainly focus on disclosure on sustainability in the insurance industry and adoption of climate related risk methodologies.