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ESG risk assessment for insurance companies

ESG risk assessment for insurance companies (4u)

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Doelgroep

Risk professionals and executives responsible for carrying out the sustainability risk assessment, such as risk managers, asset managers and modellers.

Doelstelling

The purpose of this training course is to provide risk professionals with a perspective on the importance of assessing sustainability risks in the insurance company for risk management purposes, as well as the growing supervisory expectations. The training will focus on how to integrate sustainability (ESG) into the risk management of the insurance company and aims to give the risk professionals a complete overview of the challenges in the field of sustainability risk assessments.

Inhoud

1. The scope of sustainability risks

  • Defining sustainability risks relevant for insurance companies, on both the asset and liability side of the balance sheet.
  • Presenting an overview of how sustainability risks may evolve on the short and long-term, including various second order effects.
  • Addressing a particular focus on climate change risks, based on scenarios of the IPCC, taking into account the EU’s commitment in the European Climate Law, the European Green Deal and its Renewed Sustainable Finance Strategy.

2. The components of an ESG risk assessment

  • Debating the shortcomings of Solvency II to fully capture sustainability risks (e.g. one year value-at-risk framework) and the need for an additional ESG assessment.
  • Explaining how to carry out an in-depth analysis on the implementation of an ESG risk assessment, both qualitative and quantitative.
  • Including forward-looking modelling in the risk assessment.

3. Current state of regulatory requirements on ESG risk management

  • Debating the possibility of Solvency II pillar 1 capital requirements and the consequences for insurance companies, i.e. a green supporting factor and brown penalising factor.
  • Presenting an overview of pillar 2 requirements concerning sustainability risk management, such as including sustainability in the advice of the actuarial function on the underwriting, sustainability as a factor in the investment policy, risk management and remuneration.
  • Focusing in particular on the inclusion of climate change risk scenarios in the Own Risk and Solvency Assessment (ORSA).
  • Shortly briefing on the various sustainability reporting for insurance companies and its usefulness for risk management.

4. Quantitative and qualitative approaches to measure ESG risks

  • Discussing the scenarios made available by EIOPA, such as its opinions on sustainability, on climate change risk scenarios in the ORSA, on SCR natcat etc., and how to convert these climate change risk scenarios in a useful impact study for an insurance company.
  • Discussing the methodology of EIOPA to include climate change in the EIOPA stress test.
  • Presenting an overview of various scenarios on climate change used (or planned) in national stress tests of other European supervisors, such as De Nederlandsche Bank (NL), The Bank of England (UK) and the Bundesanstalt für Finanzdienstleistungsaufsicht (DE).
  • Debating the impact of climate change on property investments and mortgage loans, in light of the interest the National Bank of Belgium has invested in the topic;
  • Debating the use of active investment funds that focus on sustainable investments.
  • Debating the impact of the EU sustainability taxonomy on the process followed by investors to provide funding to insurance companies, based on the sustainability of its investments as well as of its product offering.

5. Dealing with the data challenge of ESG risks

  • Discussing the use of ESG ratings and information of ESG rating agencies.
  • Discussing the various reporting on sustainability of (European) businesses and how to use such information for the ESG risk assessment.

6. Reporting on the ESG risk assessment.

  • To the management of an insurance company: discussing ways to present the result of an ESG risk assessment to the upper management, considering the high degree of uncertainty and long-term indirect effects of sustainability in general and climate change in particular.
  • To the supervisor: discussing the supervisory expectations and the expected future additional requirements.
  • To investors: presenting an overview of legally required disclosures and useful voluntary information towards investors and rating agencies.
  • To the general public and policyholders: debating on how to communicate on sustainability risks to the general public, e.g. on higher premia for risks affected by climate change, insurability and protection gap, the exposure to transition risk of legacy investment products etc.

The training will be given in English.


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