Terry Narine, a climate actuary and the CEO of ACTUWIT Consulting, a 2025 InsuranceERM award winner, explains why climate metrics matter more than ever for insurers, areas to track and how ACTUWIT can support insurers in this space
Why are climate change metrics becoming increasingly important for insurers today?
Terry: Given the proliferation of emerging climate disclosure standards around the globe, insurers must place increasing emphasis on climate metrics not only to remain compliant, but to tell their risk stories.
From TCFD, IFRS S1 and S2, and possibly an upcoming S3; EU Directives; the UK's SS5/25; the NAIC climate survey in the US; B-15 in Canada; Australian requirements; as well as initiatives in Japan, South Korea, Colombia and other places, there is no escaping that regulators and the capital markets are watching insurers' efforts in the climate space.
Climate metrics have become a way to provide assurance to external audiences about how resilient balance sheets are to climate risk. Additionally, companies that report on metrics are probably going to have more access to capital markets for funding purposes.
What are the key climate metrics that insurers must disclose?
Terry: Several key metrics come to mind.
Companies can set targets to track whether, and by how much, their portfolios are decarbonising over time. This can include a reduction in energy assets and an increase in sustainable assets in the portfolio. Such targets allow firms to assess year-on-year progress in reducing portfolio carbon exposure.
There are several more specific metrics that can be monitored. Methane reduction is one important measure, while carbon intensity - CO₂ emissions per dollar of revenue - and economic carbon intensity - CO₂ emissions per dollar invested - provide additional insight into the environmental impact of both underwriting and investment portfolios.
In terms of portfolio alignment with net-zero goals, insurers should also consider greenhouse gas (GHG) Scope 1, 2, and 3 emission reporting. In addition, climate scenario testing generates metrics that can be incorporated into ORSAs and financial condition reporting, which help firms to assess potential exposures and demonstrate the resilience of their portfolios under different climate scenarios. Several available algorithms can also stress test the market values of assets in terms of their exposure to climate risk scenarios.
How can ACTUWIT support insurers with climate regulatory reporting and metrics?
Terry: Many practitioners in the climate disclosure space are scratching their heads about best practices for climate reporting. That's because a repository of best practices does not currently exist. ACTUWIT has the benefit of being able to view what various clients around the world are doing on climate change disclosure.
Bringing together these best practices provides insurers with confidence that their climate reporting is robust and aligned with regulatory expectations.
What are ACTUWIT's climate metric capabilities?
Terry: ACTUWIT provides climate risk insights for both sides of an insurer's balance sheet. Our capabilities include an algorithm that adjusts asset values based on exposure to energy or renewable assets. It also includes mortality and morbidity tables to adjust liability calculations for the effects of climate change on life and health outcomes. Finally, we can produce a full disclosure report signed by a qualified actuary if clients choose to rely on us for their climate reporting.
How can insurers use climate metrics to narrate their risk stories through tools like scenario analysis and ORSA reporting?
Terry: ORSA exercises can paint a picture of how resilient an insurer's capital is to climate change. A resilient balance sheet is more likely to attract investor interest and capital market access. It also reduces the risks of lawsuits and makes the board more comfortable. By running climate scenarios, the narrative from an ORSA can demonstrate that the company's capital is not vulnerable to losses from climate change.
How can ACTUWIT help insurers in this area?
Terry: ACTUWIT's primary role is to ease the pain of climate change reporting for insurers. We can perform various steps in the climate disclosure reporting value chain. This can include everything from peer review and benchmarking all the way to producing a full climate disclosure report. We can handle stress testing and produce a standardised climate change report for insurers to incorporate with their financials or ORSA/FCR reporting.
What is your outlook for insurance climate regulatory reporting over the next five years?
Terry: I think we are moving to a phase where more standardised reporting and metrics will emerge. This way, it will become easier for investors to compare companies across the spectrum. Yes, climate change reporting is still in its infancy. But with so many initiatives and standards emerging, it won't be long before more relevant metrics make their way to the top. We're also going to see the life and health insurers play catch-up with P&C insurers in this space over the next few years.
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