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Sustainable Markets Initiative (SMI) Insurance Task Force

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A significant global insurance industry commitment to drive climate positive action at pace

At the invitation of the former Prince of Wales, Lloyd’s has brought together leaders from a number of the largest and most influential global insurance firms to form an Insurance Task Force (ITF) as part of the Sustainable Markets Initiative, to drive progress as a group and accelerate the pace of industry transitions towards a more resilient and sustainable future, putting Nature, People and Planet at the heart of global value creation.

The ITF, chaired by Lloyd’s Chairman Bruce Carnegie-Brown, has committed to supporting the global transition through delivering five key initiatives in 2021 through its Statement of Intent that will provide innovative new insurance products and services, and critical financial and risk management support across a number of industries and geographies to drive positive change.

Latest news from the Insurance Task Force

Disaster resilience framework for climate-vulnerable countries.

The ITF has launched a Disaster Resilience Framework for Climate-Vulnerable Countries. 

This framework aims to demonstrate the opportunity that exists to blend public and private investment with insurance that could reengineer and drastically improve disaster resilience in low- to middle-income countries who are most at risk from climate-exacerbated extreme weather events. 

It highlights the unique potential there is for multilateral development banks, international aid donor and the private sector to partner to create large scale, repeatable, efficient and high impact physical, economic and humanitarian financing and risk mitigation solutions for climate-vulnerable developing countries.

Sustainable Products and Services Showcase

The ITF has published a Sustainable Products and Services Showcase, presenting the wide-ranging innovative insurance solutions currently available to customers to develop, invest in and scale their sustainability initiatives, supporting green innovation across multiple sectors and geographies. 

It shows the critical role the global insurance industry is already playing in underpinning and safeguarding the efforts of multiple industries as they drive climate-positive action to adapt and transition to a sustainable future and comes as action from one of the five commitments the ITF signed up to deliver throughout 2021.

2021 commitments

In line with the commitments laid out in the Statement of Intent, the ITF is focusing its attention on delivering action across five specific areas throughout 2021:

Driving insurance product and services innovation

to empower commercial customers to develop, invest in and scale their sustainability initiatives, supporting green innovation across multiple sectors and geographies. As part of this initiative, the Task Force will launch at least two new insurance products to protect priority industries, such as nuclear energy, hydrogen and offshore wind, against an evolving risk landscape, in order to enable their accelerated growth.

Implementing sustainable processes across the insurance supply chain

to encourage and incentivise individuals to take positive actions to live more sustainably. This will include launching an industry-wide framework to drive sustainable outcomes for customers, for example through introducing “build back better” claims clauses in home insurance policies to encourage customers to rebuild damaged properties with more sustainable materials in support of a net-zero transition.

Establishing a public-private disaster resilience, response, and recovery framework

to help protect developing nations from the evolving economic and societal impacts of climate change, including the effects of increasingly frequent and severe weather events. The framework will leverage the insurance industry’s unique ability to combine an insurance product with risk management and loss recovery services, in order to increase preparedness for and limit the impacts of these events. Once developed, this solution will be rolled out across vulnerable countries to support better disaster response and recovery, with a pilot being initiated in 2021.

Developing a framework for accelerating and scaling sustainable investment

to help unlock the global (re)insurance industry’s more than $30tn in assets under management, increasingly directing capital towards investments that drive climate-positive outcomes in both developed and developing nations. As part of this initiative, an investment proposal will be developed through collaboration between public and private sectors, with a particular focus on renewable energy and climate transition assets to enable the transition towards a low-carbon economy.

Defining the industry’s ability to enable multi-sector transitions

through developing an approach to measuring the carbon footprint across underwriting portfolios and establishing a framework to track the global insurance industry’s ability to support the transition towards net zero across multiple industries and geographies. Over time, this framework can be scaled to incorporate additional data and metrics as these become available.

The ITF will align with existing initiatives to accelerate activity and deliver tangible progress over the course of 2021, and ahead of the 26th UN Climate Change Conference of Parties (COP26) in November 2021, which marks a significant milestone in global efforts to combat the impacts of climate change.

“The insurance industry is exceptionally well placed to understand the impact of climate change and the damage it can cause to us all if we don’t take action now. This is why I am so pleased that a large number of the world’s leading insurance companies have joined together to identify how the insurance industry can help put Nature, People and the Planet at the heart of our entire economy.” The former Prince of Wales

“As the world begins to recover from a pandemic that has caused significant and far-reaching financial and societal challenges, it does so with an opportunity to build back with sustainability as a foundation and guiding principle. Although climate change poses unprecedented systemic risk, it is one which – through partnership and accelerated action – we have the means to address. As a task force, we are making a resolute commitment to be a catalyst for action to help create a more sustainable future through the risks we manage and the capital we invest.” Bruce Carnegie-Brown, Lloyd’s Chairman

Sustainable Markets Initiative (SMI)

You can find out more about the Sustainable Markets Initiative on the SMI website

SMI Insurance Task Force launch

Read about the launch of the SMI Insurance Task Force

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Prince Charles Launches Partnership with Insurance Industry to Tackle Climate Change

His Royal Highness the Prince of Wales launched his Sustainable Markets Initiative (SMI) Insurance Task Force during a visit today at Lloyd’s.

The SMI Insurance Task Force, convened by Prince Charles and chaired by Lloyd’s, is comprised of executives from many of the world’s largest insurance and reinsurance companies, providing an influential platform for the sector to collectively advance progress towards a resilient, net-zero economy. (See below for a list of the members of the SMI task force).

The global insurance industry has a critical role to play as a result of its unique view of the climate crisis – via decades “of providing support to communities, businesses and economies in the face of increasingly severe and frequent weather events…,” said Lloyd’s in a statement.

The SMI Insurance Task Force published its Statement of Intent, which commits to provide climate positive financing and risk management solutions to support and encourage individuals and businesses around the world to accelerate their transition to a sustainable future.

These actions include adapting and expanding coverage for offshore wind projects in response to rapid growth and new technologies, alongside the implementation of “build back better” claims clauses in home insurance policies to encourage customers to rebuild sustainably.

The SMI Insurance Task Force will also work with governments to establish a public-private disaster resilience, response and recovery framework, which will help protect developing nations from the evolving economic and societal impacts of climate change.

To support the rapid growth of green projects and innovation, the SMI Insurance Task Force will develop a framework to help unlock the more than $30 trillion in assets under management, increasingly directing capital towards investments that drive climate-positive outcomes in both developed and developing nations.

“The insurance industry is exceptionally well placed to understand the impact of climate change and the damage it can cause to us all if we don’t take action now,” commented HRH the Prince of Wales. “This is why I am so pleased that a large number of the world’s leading insurance companies have joined together to identify how the insurance industry can help put Nature, People and the Planet at the heart of our entire economy.”

Lloyd’s Chairman Bruce Carnegie-Brown added: “As the world begins to recover from a pandemic that has caused significant and far-reaching financial and societal challenges, it does so with an opportunity to build back with sustainability as a foundation and guiding principle. Although climate change poses unprecedented systemic risk, it is one which – through partnership and accelerated action – we have the means to address. As a task force, we are making a resolute commitment to be a catalyst for action to help create a more sustainable future through the risks we manage and the capital we invest.”

During the visit by Prince Charles, the Lloyd’s Lutine Bell rang twice to mark “the new and significant global insurance industry commitment to drive climate positive action,” through a number of key initiatives for commercial and individual customers.

The Lutine Bell has traditionally been struck on the news of an overdue ship — once for the ship’s loss (or for bad news), and twice for the ship’s return (or good news). The bell more recently has been rung to mark special occasions. In 1858, the bell was recovered from the HMS Lutine, a ship that sank in 1799 off the Dutch coast.

The SMI Insurance Task Force’s members are:

• AIG: Peter Zaffino, president and CEO
• Allianz: Oliver Bäte, CEO
• Amwins: Scott Purviance, CEO
• Aon: Greg Case, CEO
• Ascot: Andrew Brooks, CEO
• AXA: Sean McGovern, CEO AXA XL
• Beazley: Adrian Cox, CEO
• Conduit Re: Neil Eckert, executive chairman
• Direct Line Group: Penny James, CEO
• Hiscox: Bronek Masojada, CEO
• Howden Group: David Howden, CEO
• Legal & General: Nigel Wilson, CEO
• Lloyd’s: John Neal, CEO
• Marsh McLennan: Dan Glaser, president and CEO
• Munich Re: Joachim Wenning, CEO
• Phoenix: Andy Briggs, group CEO
• Tokio Marine Kiln: Brad Irick, CEO

Topics New Markets Market Climate Change

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Kansas City (April 8, 2022)

U.S. Insurance Commissioners Endorse Internationally Recognized Climate Risk Disclosure Standard for Insurance Companies

Bipartisan action requires use of task force on climate-related financial disclosures for annual state-led survey to protect consumers starting this year.

A bipartisan group of state insurance regulators led by Insurance Commissioners Ricardo Lara of California and David Altmaier of Florida adopted a new standard for insurance companies to report their climate-related risks, in alignment with the international Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD standard is the international benchmark for climate risk disclosure and will help insurance regulators and the public to better understand the climate-related risks to the U.S. insurance market, which is the largest in the world. This announcement during the National Association of Insurance Commissioners’ (NAIC) spring meeting in Kansas City, Missouri, puts U.S. state insurance regulators on the forefront of climate risk disclosure to protect consumers.

Commissioners Lara and Altmaier are co-chairs of the NAIC Climate Risk & Resiliency Task Force (Task Force), which was established in 2020 to coordinate all of the NAIC’s domestic and international efforts on climate-related risk and resiliency issues. The Task Force developed the new TCFD-aligned survey over a 14-month public participation process led by Oregon Insurance Commissioner Andrew Stolfi and Rhode Island Superintendent Elizabeth Dwyer in coordination with Commissioners Lara and Altmaier, and marks the first update to the NAIC’s Climate Risk Disclosure Survey approach since it was created in 2010.

The Task Force determined that implementing a TCFD-aligned disclosure framework would enhance transparency about how insurance companies manage climate-related risks and opportunities and incorporate international best practices, among other benefits that the Task Force identified in the new standard . Insurance regulators from France, Switzerland, and the United Kingdom currently require TCFD-aligned reports. U.S. financial regulators such as the U.S. Securities and Exchange Commission are also taking steps toward requiring TCFD-aligned disclosures for other financial institutions.

Under the new standard, insurance companies required to respond to the annual NAIC Climate Risk Disclosure Survey will need to comply with TCFD reporting by November 2022. Fifteen states – including California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington – have committed to utilize the NAIC survey in 2022 for insurance companies licensed in their jurisdictions, representing nearly 80 percent of the U.S. insurance market. While 28 insurance companies provided TCFD-compliant reports in 2021, this list will grow to nearly 400 insurance companies and groups  as a result of the consensus demonstrated today.

“Our global climate crisis affects every state, requiring us to reach across partisan divides to find solutions that protect all people,” said California Insurance Commissioner Ricardo Lara . “By holding insurance companies to this global standard for climate disclosure, insurance regulators are showing the power of united leadership in our efforts to address climate change and reduce the negative impacts on insurance consumers.”

"The NAIC's action shows that our system of state-based insurance regulation remains strong and flexible in responding to changing conditions in our markets and our world," said Florida Insurance Commissioner David Altmaier . "Thank you to my fellow regulators for your commitment to work together to protect consumers."

“We have all been affected by climate-related events, including wildfires, floods, and increased extreme weather. The first NAIC climate risk survey, created more than 10 years ago, led the way at the time, and it’s great to see the NAIC lead again by being the first U.S. financial system regulator to adopt TCFD-aligned disclosure requirements,” said Oregon Insurance Commissioner Andrew Stolfi . “I’m grateful for the robust participation in this process over the past year and the strong support to adopt internationally aligned climate risk disclosures, and I look forward to continuing our work by supporting insurers in shifting to this new reporting framework.”

“Enacting the TCFD standard will give insurance regulators greater oversight of insurance companies’ strategies for addressing climate change through investments, board governance, and all areas of their operation, helping us to protect consumers in the future by reducing climate risks,” said Elizabeth Dwyer, Superintendent of Banking and Insurance for Rhode Island .   

“Our bipartisan action to endorse a common standard for disclosing insurance companies’ climate risks shows progress is possible on protecting consumers from the threats of a warming planet,” said Maryland Insurance Commissioner Kathleen Birrane . “Through our collective state level actions we are protecting consumers from climate risks that affect our whole nation.”

"I am delighted that the NAIC has adopted changes to our NAIC Climate Risk Disclosure Survey. Participating insurers will now disclose their climate change exposure using the internationally accepted TCFD," said Mike Kreidler, Insurance Commissioner of Washington and member of the Sustainable Insurance Forum . "Nearly 20 years ago I was privileged to start creating the Survey with my then-Climate Change Committee co-chair from Nebraska. I’m pleased that the Survey is now updated to reflect state-of-the-art disclosure requirements in line with international standards."

“Consumers in every state are facing increased threats from extreme weather. Taking united action is more critical than ever before to protect consumers’ access to affordable insurance," said Connecticut Insurance Commissioner Andrew N. Mais . "These standards for reporting insurance companies' climate risks and strategies will help regulators and consumers better understand and address the impacts of climate change."

“Few regulators have more experience and insight into the macroeconomic effects of climate risk than insurance regulators,” said Mike Consedine, Chief Executive Office of the National Association of Insurance Commissioners . “By modernizing the NAIC climate disclosure survey for the first time since its inception, participating members are taking a comprehensive and unified approach to protecting consumers through our state-based system of insurance regulation.”

International regulators and climate groups who have called for compliance with TCFD disclosures welcomed the news.

“With insurance companies’ investments and underwriting reaching around the globe, it is critical that insurance regulators speak the same language as we seek to protect markets from climate risks,” said Anna Sweeney, who supervises the United Kingdom’s insurance sector and serves as Chair of the UNDP Sustainable Insurance Forum . “With this landmark action by U.S. regulators, alongside the work of a number of leading jurisdictions, we are well on our way to holding the global insurance sector to the same standard, allowing nations and states to work across borders like never before.”

“By putting U.S. insurance companies on the same level of accountability and transparency with other global sectors and insurance markets in terms of managing and disclosing climate risks, U.S. state insurance regulators are showing the kind of leadership on a national scale that will help meet the global goals of climate-resilient communities and net-zero economies,” said Butch Bacani, who leads the U.N.’s Principles for Sustainable Insurance Initiative , the largest collaboration between the U.N. and the global insurance industry.

“Aligning U.S. insurance companies’ climate disclosures with the global norm is a major step forward to protect financial markets and consumers who rely on insurance for safety and security,” said Steven Rothstein, Managing Director, Ceres Accelerator for Sustainable Capital Markets . "The bipartisan leadership of Commissioner Lara of California and Commissioner Altmaier of Florida is in short supply around the globe. It is needed more than ever before as we address climate-related financial risks across investment portfolios and global supply chains.”

Media notes:

• The Task Force for Climate-Related Financial Disclosures released the standards in 2017. The Task Force consists of 31 members from G-20 nations. Click here to read more: https://www.fsb-tcfd.org/
• TCFD reporting includes sections on governance, strategy, risk management, investments, and metrics, requiring companies to measure their progress and commit to reducing climate risks across all areas of their business.

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.

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Disaster Resilience Framework

A story of how the insurance industry developed a framework which blends public and private investment with insurance, to drastically improve disaster and climate resilience in low- to middle-income countries.  

Reimagining Resilience

The direct impact of climate change is not always felt equally around the world. As the planet’s climate changes and extreme weather events become more frequent – evidenced by flooding, wildfires, droughts and windstorms – it’s made clearer that climate risk is disproportionately concentrated in developing nations.   

The countries most at risk are often the ones most vulnerable. The Insurance industry has an important role to play in improving global resilience and reimagining the financial response when natural catastrophe strikes. This is a challenge which must be met with urgency, as unlike industrialised countries, in developing and emerging nations the share of economic losses from natural catastrophes that are not covered by financial risk-transfer solutions remains well above 90%. While foreign aid can help societies recover following major disasters, developing economies need more reliable and sustainable financial mechanisms in place.  

The Disaster Resilience Framework, launched at COP26 and developed by the Sustainable Markets Initiative Insurance Task Force aims to provide central authorities with a framework to proactively manage the impact of climate perils, enabling direct access to risk financing and disaster mitigation support in order to offer effective and sustainable protection to those in greatest need. 

Creating a Resilience Framework

Preventative measures prior to an event are equally important as insurance, as every $1 spent in risk reduction saves $4.50 in ex-post recovery. The challenge is to build the confidence and incentives necessary to unlock the forecasted investment, as well as pass on residual risk to those who are set up to bear it.

The Task Force has developed an adaptable, scalable framework showing how insurers and investors can provide a blended finance solution. 

Pre-disaster risk reduction - the insurance sector’s highly developed probabilistic modelling approach, applied in the context of future warming scenarios, provides climate risk insight, identifies the risk of doing nothing and incentivise investment in risk mitigation.

Building resilience with contingent risk finance -  by pooling risk, through government contingency funds or insurers, high probability, low impact events can be mutualised. Parametric insurance instruments are set up to pay claims in the most time efficient way possible, which helps low resilience countries to recover faster. Increasing the availability of indemnity insurance for less vulnerable business enables governments to concentrate funding for the most vulnerable people.

Post-disaster response and resilience - through public-private partnership, insurers can empower investors, asset managers and other risk owners with the tools and knowledge to develop their own view of risk, for disaster risk response as well as financial instruments.

This framework creates a vital opportunity for low- to middle-income countries to build resilience against increasingly frequent and severe weather risks, as well as driving sustainable societal and economic recovery post-disaster.

Taking Action

In an effort to demonstrate the framework’s potential and drive action at pace, the Sustainable Markets Initiative Insurance Task Force is actively working across two pilot projects focused on specific perils faced in Kenya and Fiji. 

Together with agencies in Kenya, they are developing a novel approach to bring private sector resources to bear in support of more resilient agriculture across the drought and flood prone country. The initiatives being explored include a crop or livestock insurance mechanism tied to an impact investment bond, in which the government uses the principal to finance resilience initiatives among small holders. 

This framework will result in bold new ideas on how to advance the types of risk management third world countries desperately need

The Task Force has also created a parametric cyclone solution, based on wind speed, which is designed to provide livelihood protection for low-income households in Fiji, whose assets are currently uninsurable or uninsured. Parametric insurance products, which offer a pre-determined amount of coverage based on a pre-determined trigger event, can provide a mechanism to increase insurance coverage and speed-up claims pay-out after the catastrophe. 

These two projects demonstrate the adaptability of the disaster resilience framework, highlighting the opportunity that exists to blend public and private investment with insurance to reengineer and drastically improve disaster resilience in low- to middle- income countries most at risk from climate-exacerbated extreme weather events.

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Collaboration Makes a Difference

The insurance industry has been engaged in disaster risk finance for many decades, and are passionate and committed to collaborating with governments to protect communities across the world. Building societal resilience to climate risk is at the heart of the Disaster Resilience Framework's strategy, the time for collaboration is now.

As a convener of risk expertise and finance, the Insurance industry has a unique opportunity to enable climate-vulnerable countries to flourish through sustainable financing, relevant insurance products and effective risk management. 

Insurance providers look forward to working with their stakeholders on this important mission. 

positioned to help

The Insurance industry’s ability to understand natural catastrophe risk, has allowed for physical economic, humanitarian and financial risk mitigation and transfer tools and methods to develop.

The understanding of this volatile risk has allowed investors to engage in meaningful commitments that protect industries and economies for the longer term.

As a consequence, the insurance industry is uniquely placed to assess and manage the climate risks and opportunities of industrial and commercial organisations, sovereigns and communities including:

Transition to net-zero planning, capital, and liquidity solutions;

Humanitarian strategic preparation, disaster risk reduction and risk pooling;

Funding and structuring of resilience development programmes;

Contingent risk financing solutions to support all the above, from sovereign to micro-insurance, and

Strategies for donor investment programmes.

Learn more about SMI's Insurance Task Force here

This case study was prepared by Lloyd's and aligns with articles 6, 9, and 2 in the Terra Carta mandate.

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