A fresh take on risk and valuation

Climate change risk management for insurers

Integrating climate change risk into your ORSA, governance and risk-management system
Designed to help your risk management department in complying with regulatory requirements

Climate change is expected to pose a serious risk for (re)insurers and society in the future. Without intervention, global average temperatures are expected to keep rising, along with the associated physical risks. This could increase (re)insurers' underwriting risk, challenge business strategies and negatively impact asset values. Regulators worldwide have made significant progress in providing guidance to (re)insurers on how to take account of climate change risk. 

EIOPA expects (re)insurers to integrate climate change risk in their governance, risk management framework and ORSA and to perform climate change scenario analysis over the short and long term. (Re)insurers are expected to perform materiality assessments on a broad range of climate risks and analyse scenarios relevant to their portfolio. EIOPA will begin to monitor the application of their ORSA Opinion from April 2023.

The BMA similarly expects (re)insurers to address climate change risk in their governance, risk management framework and GSSA/CISSA. BMA will begin to monitor progress on the guidance during 2023, and the framework should be fully adopted by year-end 2025. BMA expects an implementation status update and at least a climate risk exposure analysis in the year-end 2022 ORSA, with continuous advancements in scenario analysis up to 2025.

How does Finalyse address your challenges?

Governance: 

Integration of climate change risks in the ORSA, governance and risk management systems.

Risk identification:

 Identification of a range of climate change risk exposures and materiality assessment of your portfolio.

Mapping of risks:

Mapping the identified climate change risks to traditional prudential risk categories for (re)insurers.

Scenario definition:

Defining relevant climate scenarios for ORSA, leveraging online resources referenced by EIOPA (e.g. NGFS and IPCC).

Modelling of risks:

Modelling the risks for your scenarios, translating the climate projections into financial and underwriting impacts.

ORSA approach:

Defining modelling approach for ORSA scenarios, e.g. balance sheet stress tests versus projections over short or long term.

Looking for support with climate change risk management?
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How does it work in practice?

Risk management framework for climate change risk:

 

Mapping of climate change risks:

Key Features

  1. Benefit from Finalyse’s extensive experience and expertise in the area of risk management for insurers.
  2. Development of a risk management framework that integrates climate change risk in your governance, risk-management system and ORSA.
  3. Support in complying with the ever increasing regulatory burden and alignment with the market practice.

Our subject matter experts

Frans Kuys
Principal Consultant - Expert in Climate Change Risk Management for Insurers / Solvency II / IFRS 17 / ICS / IORP II / Market Risk / Strategic Asset Allocation / AXIS

Frans is an actuary and Financial Risk Manager with international experience in the pensions and insurance sectors. He has been specialising in climate change risk management, actuarial valuations (AXIS), financial reporting (IFRS17, IAS19), regulatory reporting (Solvency II, ICS, IORP II), market risk management (ALM, SAA) and investment consulting.

Evelyn McNulty
Managing Consultant - Expert in Climate Change Risk Measurement / IFRS 17 Implementation / Solvency II / Prophet

Evelyn is an actuary and Managing Consultant in Finalyse Dublin. She has over 14 years’ experience between consulting and life industry. Evelyn has expertise in regulatory and financial reporting, actuarial modelling, and capital projections. She is currently focusing on climate change risk management and IFRS 17.