Jonathan Dixon, secretary general of the International Association of Insurance Supervisors, discusses with Sarfraz Thind the hopes for COP26 and how insurers may benefit from the global climate conference
The International Association of Insurance Supervisors (IAIS) was one of the first international standard setting bodies to issue an analysis of climate change in 2018. Ahead of COP26 this weekend, the authority provides a view on how regulators and insurers can work to shift the balance on climate change.
What do you hope to see coming out of COP 26?
It is important to highlight the significance of governments developing stable long-term climate policy frameworks to provide a solid base from which insurers can assess the climate-related risks to which they are exposed, and manage the necessary transition. This is a clear area for action by governments, where there is not a clear market solution. Within this framework, it is the role of insurance supervisors to ensure that insurers are taking action to assess and address climate-related risks and to support an orderly transition to net-zero.
As with other international organisations, we are using the momentum created by COP26 to reaffirm our clear and urgent commitment to addressing the risks from climate change. We are pleased to see various organisations are planning to, or have issued, relevant statements and publications in the COP26 timeframe.
From the IAIS side, we published a statement on the IAIS commitment to amplify response to climate change at the end of October, following on from earlier work, including guidance on the supervision of climate risk in the insurance sector and a quantitative study on how insurers' investments are exposed to climate change.
In addition, we will launch the Climate Training Alliance (CTA) e-learning portal on climate risk, in collaboration with the Bank for International Settlements - Financial Stability Institute (BIS-FSI), the Central Banks and Supervisors Network for Greening the Financial System (NGFS) and the UN-convened Sustainable Insurance Forum (SIF) on 3 November. The CTA portal will provide training resources for central banks and supervisors responding to climate risk.
How is the IAIS's own climate policy developing and do you see an increase in traction on climate work by insurers this year?
The IAIS and its members have been working on the issue for several years, but the pace has really picked up this year and will do so even more next year. Both insurance supervisors and the insurance sector are increasingly focusing on addressing risks from climate change – for example, incorporating climate change into insurers' risk management practices.
Insurers are increasingly recognising the importance of climate risk and have begun to integrate climate risk in various facets of their operations, for example, their underwriting practices through initiatives like the Net-Zero Insurance Alliance; their investment decisions and their public disclosures. Over the coming years, we expect insurers and insurance supervisors to build on and integrate existing work on climate risk into their day-to-day risk management and supervisory frameworks.
Is international collaboration desirable to influence the issue? Have you been working with international rule-makers, particularly in the US, and is there a chance COP 26 will boost this?
It is only possible to create solutions to this global threat with an international and coordinated approach.
Collaboration and cooperation are at the heart of what we do as an international standard setter. The IAIS is a membership organisation of insurance supervisors and regulators from more than 200 jurisdictions, constituting 97% of the world's insurance premiums. At the IAIS, we provide a platform for them to share supervisory practices and agree on standards for insurance supervision. Within the IAIS, there is strong consensus on the importance of urgent action on climate change. US members, which includes FIO, FRB, NAIC and state regulators, have been very active in our dialogue on climate risk, including as members of the IAIS Climate Risk Steering Group.
In addition, we work very closely with other international standard-setters such as the FSB and international bodies such as the NGFS. In looking at climate risk, we are considering both the impact across the insurance sector but also across the financial system.
The momentum created by COP26 has provided a springboard for necessary conversations and to urgently advance work to address the risks—and opportunities—associated with climate change.
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