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How advanced are European (Re-)Insurers in Disclosing Climate Change Related Risks?

The Financial Stability Board (FSB) established the Task Force on Climate-Related Financial Disclosures (TCFD) to provide recommendations on the information companies should disclose to help investors better assess and evaluate climate-related risks. In the inaugural Climate Change Reporting Barometer, Milliman evaluates the maturity of climate change reporting by European insurance and reinsurance companies based on TCFD requirements. To do so, consultants analyzed the climate and sustainability reports of 20 companies from 2022, using reports published in June and July 2023.
Written on 06/24/24

The Milliman Climate Change Reporting Barometer provides insights into current practices and challenges in climate reporting. It examines how companies worldwide disclose climate-related risks and opportunities, aiming to enhance transparency and comparability. The report evaluates how these risks are integrated into business strategies, with a particular focus on incorporating ESG factors into risk management. Companies face the challenge of systematically identifying, assessing, and managing climate-related risks. Five key points are particularly emphasized in this context.

A central theme is the integration of ESG (Environmental, Social, Governance) factors into risk management. Companies face the challenge of systematically identifying, assessing, and managing climate-related risks. Five key points are particularly noteworthy:

1. Regulatory Requirements

Companies increasingly need to comply with regulatory requirements mandating comprehensive reporting on climate-related risks, including international standards like the TCFD recommendations.

2. Climate Risks and Financial Stability

Climate-related risks can directly impact companies' financial stability. Both physical risks (e.g., extreme weather events) and transition risks (e.g., policy measures to reduce emissions) must be integrated into risk analyses.

3. Strategic Integration

Strategic integration of ESG factors requires close collaboration across departments, including risk management, finance, and sustainability. Companies must ensure that climate-related risks are not considered in isolation but embedded in overall strategy.

4. Data and Reporting

One of the biggest challenges remains the availability and quality of data. Companies need reliable data sources and robust methods to assess climate risks. The report emphasizes the need to invest in modern analytical tools and data platforms.

5. Transparency and Disclosure

Transparency in reporting is crucial to gain stakeholders' trust. The report shows that companies increasingly publish detailed information about their climate strategies and risk management approaches, including both qualitative and quantitative data.

Case Studies and Best Practice

The report includes case studies of companies considered pioneers in climate reporting. These companies are characterized by the following practices:

  • Holistic Risk Analysis: Integration of climate risks into all business areas.
  • Innovative Approaches: Use of scenario analyses and climate models to predict potential impacts.
  • Stakeholder Engagement: Active involvement of investors, customers, and other stakeholders in the reporting processes.

Conclusions and Recommendations

The Milliman Climate Change Reporting Barometer concludes that integrating ESG factors into risk management is crucial for companies' long-term success. The authors make the following recommendations:

  • Strengthening Governance Structures: Implement clear responsibilities and processes for monitoring climate-related risks.
  • Expanding Data Capabilities: Develop robust data infrastructures to support well-founded risk analyses.
  • Promoting Transparency: Enhance disclosure standards to improve comparability and stakeholder trust.
  • Education and Training: Raise employee awareness of climate-related risks and opportunities through targeted training programs.

For further insights into the report, you can find the full document here