TCFD Reporting

in the Swiss insurance market

This paper records the status quo on TCFD Reporting in the Swiss insurance market and highlights the regulatory developments both internationally and in the EU that have an impact on Switzerland. Furthermore, an analysis of the market was conducted. TCFD reports of Swiss insurers have been analyzed and based on this analysis recommendations for the Swiss insurance market were formulated.

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Disclosure of climate-related opportunities and risks

Climate-related opportunities and risks will also have an increasingly large financial impact on insurance companies in the long term. The consideration of climate change aspects not only leads to a better informed and more efficient allocation of capital. It also makes it possible to better estimate expected losses when ensuring risks and thus provides important information for pricing. The insurance industry's demand for standardized methods and tools to better map aspects of climate change and use them for their own stability, resilience and profitability is correspondingly high.

At the same time, insurance companies must inform the public transparently about their risks. Being able to adequately assess and evaluate climate-related opportunities and risks is essential to maintain the trust of customers, investors, regulators, and other stakeholders. Industry participants in Switzerland are at different stages of progress towards the disclosure of climate-related information. The institutions concerned report on their material climate-related financial risks. They show their influence on their business strategy, business model and financial planning. They also disclose their governance mechanisms and the process for identifying, analyzing, and assessing climate-related financial risks.

Role of the Swiss insurance industry in dealing with climate change

Swiss private insurers play a central role in the necessary reduction of global warming and minimization of the effects of climate change. With investments of CHF 570 billion and a premium volume of almost CHF 120 billion, the insurance industry contributes around 3.8% to Switzerland's economic output (as of the end of 2021).

The insurance industry relies on a strategic approach to managing opportunities and risks related to climate change. Insurance companies help to identifying, preventing, and reducing climate risks. This is done, for example, through the solidary natural hazard damage pool, with which buildings in Switzerland can be insured against natural hazard damage events at favorable conditions. As risk carriers, insurance companies protect companies, private individuals, and public institutions against the financial consequences of natural hazards. By integrating climate risks into insurance underwriting guidelines and designing new products, positive contributions are made to combating climate change. Finally, insurance companies, as long-term investors, are investing more in low-emission technologies and in future climate neutrality.

Disclosure of climate-related opportunities and risks

The insurance industry has committed to implementing the TCFD report as part of its non-financial disclosure. This Paper analyses whether and how re/insurance companies have implemented the recommendations on climate-related financial reporting in their reports and to compare differences and similarities.

Clearly different levels of maturity can be seen between the different categories of TCFD disclosure recommendations. These differences highlight the potential strengths and weaknesses of the insurers studied and can be used to define focus areas for improving TCFD reports.

Overall strength

The disclosure was generally found to be consistently good to very well implemented.

In principle, the reports were comprehensible and clearly structured.

Many insurers design the report in a reader-friendly manner and use informative and clear graphics.

Overall challenges

Reports are often kept very short.

Lack of crucial details for full transparency.

Governance was identified as one of the weakest topics. Responsibilities and processes are often not transparently disclosed and explained. Communication between the different areas/committees is also not transparent.

Achieved ratings

Governance	1 – 2 / 5
Strategy	1 – 3.5 / 5
Risk Management	1 – 4 / 5
Targets & Metrics	0 – 2 / 5
Principles of effective disclosure	2 – 4.5 / 5

In general, can be summarized that even if the maturity of the reports still needs to be improved, the current development shows that the industry is motivated to deal with the topic of reporting and is thus on the right track. The analysis also clearly shows that the majority of TCFD recommendations are considered and implemented in the best possible way.

The insurance companies should make sure that the TCFD disclosure becomes more than just a ticking the box exercise but instead create a value added for lenders and investors on the one hand and for themselves on the other hand. The TCFD report must be looked at as a valuable tool to perform a sustainability health check.

Tool for self-analysis of TCFD Reports

PwC is in the process of developing a TCFD Self-Assessment Tool for insurance companies. Through this new tool, insurance companies should be empowered and encouraged to optimize their reporting and thus achieve a top position in the market and the trust of its investors and stakeholders. The tool is particularly valuable for the TCFD report writers in the company.

Through the self-assessment, strengths and weaknesses can be identified. One is empowered to start valuable and detailed internal discussions and thus highlight any grievances. The tool is PwC's contribution to more transparent and standardized reporting in the Swiss insurance market.

«The TCFD is helping to bring climate risks and resilience into the heart of financial decision-making, making climate disclosure more comprehensive and comparable and helping investment for a two-degree world go mainstream.»

Mark CarneyFSB Chair 2011-2018