Key Impact Points:
- High Reporting, Low Metrics: 94% of insurers report on risk management, but only 29% disclose climate metrics and targets.
- TCFD Alignment: Just 26% cover all TCFD pillars, showing room for improvement in comprehensive climate disclosures.
- Urgent Action Needed: With rising climate disasters, insurers must enhance climate disclosures and adopt robust climate strategies.
Progress Made, But More Needed: Ceres Report Analyzes Insurers’ Climate Disclosure Alignment
Major U.S. insurance companies are making strides in disclosing their climate-related risks and strategies, but significant gaps remain, according to a new report by Ceres. The report, Navigating Climate Risks: Progress and Challenges in U.S. Insurance Sector Disclosures, scrutinizes the climate disclosures of 516 insurance groups, representing over 1,695 companies, based on their submissions to the National Association of Insurance Commissioners’ (NAIC) Climate Risk Disclosure Survey for the reporting year 2022. This survey is aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework, the global standard for corporate climate risk disclosure.
Key Insights:
- High Reporting on Some Aspects: 94% of insurers reported on risk management processes, 86% on strategy, and 81% on governance.
- Lack of Metrics and Targets: Only 29% disclosed metrics and targets related to climate risks.
- TCFD Pillars: Just 26% provided disclosures across all four TCFD pillars (governance, strategy, risk management, metrics and targets).
- Year-over-Year Improvement: Slight progress noted in risk management integration, identifying climate risks and opportunities, and reporting greenhouse gas emissions.
- Declines in Key Areas: Decreased reporting on management’s role in assessing climate risks and setting targets to manage risks and opportunities.
- Climate Scenario Analysis: Adoption is low, with only 22% conducting this forward-looking assessment in 2022.
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Jaclyn de Medicci Bruneau, the report’s lead author and Director of Insurance at the Ceres Accelerator for Sustainable Capital Markets, emphasized the urgency for the insurance industry to enhance disclosure and develop robust climate transition plans.
“Transparent reporting is crucial, but it must be followed by concrete actions to build resilience across underwriting activities and investment portfolios,” she said.
Recommendations for Improvement:
- Common Methodologies and Frameworks: Establishing standardized scenario analysis frameworks.
- Board and Management Oversight: Clear oversight for climate issues.
- Greenhouse Gas Emissions Tools: Investing in tools to measure emissions across all scopes.
- Engagement on Climate Policy: Constructive engagement on climate policy and regulatory development.
With insurers facing increasing claims from climate-fueled disasters, the report underscores the need for accelerated action to maintain affordability and availability of coverage in high-risk areas. Manifest Climate, a leading climate intelligence software provider, analyzed TCFD alignment using its proprietary methodology and AI-powered platform, providing invaluable insights for benchmarking and adopting best practices.
Laura Zizzo, co-founder and CEO of Manifest Climate, highlighted the role of the insurance sector in climate risk management. “As climate risks escalate, society, businesses, and governments now look to the insurance sector for leadership in risk identification and management,” she stated.
Andrew Mais, Connecticut Insurance Commissioner and President of the NAIC, reinforced the existential threat of climate risk and the need for urgent focus from the entire insurance sector. “This timely analysis provides a roadmap for insurers to strengthen their climate strategies and build a more resilient industry that protects policyholders and supports economic stability,” Mais said.
This is Ceres’ second annual report analyzing the insurance industry’s TCFD disclosures, following the inaugural review released in 2023 in partnership with the California Department of Insurance and Manifest Climate.
