The ACPR publication of May 22, 2024 highlights the need for insurers to take climate risks into account in their strategy, governance and internal models.
In fact, insurance companies are required to publish information on their climate risks due to several regulatory obligations:
- Solvency II Directive: internal risk management policy must cover sustainability risks, ORSA must be enriched with the integration of ESG risks
- Article 29 LEC: consideration of sustainability risks and quantitative assessment of the financial impact of the main ESG risks identified
- Article 3 at SFDR entity level: specifying the policy for integrating ESG risks into the investment process and advice
What are the key methodological points of the analysis?
The analysis is based on two time scenarios:
- a short-term scenario (2027) with a static balance hypothesis
- a long-term scenario (2050) with a dynamic balance hypothesis (possibility of adapting activities to mitigate the effects of climate change)
The cost of climate change is measured by comparing a fictitious reference scenario, which includes neither physical risk nor transition risk, with 2 adverse scenarios from the NGFS: one of orderly transition, the other of disordered transition, both taking into account the worsening frequency and magnitude of extreme climatic events(drought, flooding and marine submersion).
One of the specific features of ACPR's analyses is that they take into account the impact of climate change on health risks (expansion of vector-borne diseases such as dengue fever, air pollution and respiratory illnesses, and mortality induced by the increased frequency and duration of heatwaves).
Analysis results
Key figures :
- Between 2022 and 2050, natural catastrophe claims in France could rise by 105% in the adverse scenario and 42% in the reference scenario, with premiums increasing by 158% and 127% respectively.
- In the health and casualty sector, claims due to pollution and vector-borne diseases would increase by 89% in the adverse scenario and by 11% in the reference scenario.
- The risks of drought, submersion and flooding vary geographically, with claims increases of 2 to 5 times and premiums of 130 to 200% over 30 years.
- Fossil fuel and real estate investments will suffer the greatest losses in value between now and 2050.
How ESG Connect can help you
ESG Connect features :
- automatically integrate, calculate and manage your climatic risks
- benefit from our experts' in-depth knowledge of ESG regulations, methodologies and data
