On 22 May, a report to which JBA Risk Management contributed as part of a working group and editorial team was published, titled A framework for assessing financial impacts of physical climate change: A practitioner's aide for the general insurance sector. The report is aimed at firms and practitioners in the UK insurance industry with a foreword from the PRA, the Bank of England department responsible for the prudential regulation and supervision of around 1,500 banks, building societies, credit unions, insurers and major investment firms.
This report follows the PRA’s supervisory statement SS3/19 Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change. The working group, with representatives from across the general insurance market, convened in July 2018. The report outlines a framework for catastrophe modelling practitioners to assess financial impacts from physical climate change risk and aims to be helpful and practical, including detailed use cases to help re/insurers assess financial impacts on liabilities from climate change risk.
Using tools that are already available within the general insurance sector, including JBA’s UK Climate Change Flood Model, the report presents a number of case studies that illustrate how the proposed framework can operate in practice. The examples display how consideration of financial impacts from physical climate change risk can better inform insurers’ risk management decisions. The PRA’s intention is for the document to provide an important first step in developing tools, strategies and risk management approaches to climate change risk beyond the usual planning horizon for the general insurance sector.
At JBA, we believe that climate change is already having an impact on today’s flood exposures and that re/insurers must now start planning how to deal with climate change as a matter of priority. We hope this report helps insurers by providing a starting point for thinking about how they might do so.
The report can be found at here; feedback, suggestions and ideas on the topic should be sent directly to the PRA.
If you are concerned about changes to your exposure caused by climate change, JBA can help. Please get in touch.
