Hello, In the Core Reading, a list of areas of operation of life insurance companies affected by climate change is present. I want to understand these risks better. Added few comments against each item based on my understanding. Please supplement/validate as required. I want more examples and a wider perspective on these. 1. Investments- investing more in less fossil fuel dependent companies, higher investment in green bonds, etc 2. Product design- offering wider range of funds in unit linked product (including a green fund), what else? 3. Product pricing- higher margin to take climate risk into account, anything else?! 4. Risk management- identifying climate change as a risk and proposing actions to mitigate this risk 5. Capital management - is it related to SCR- if a climate risk module is added, SCR will increase? 6. Reserving- not sure about this one Please help. Thank you!
Hi, I think it's not only related to investments or the risk margin. It's also to do with how the assumptions change as per the effect of climate change. For example mortality rates, value of assets because of inter-linkage with unsustainable sources of investments. It could also affect risk margins since a new risk is being considered. I think for #5, yes the SCR should increase Let me know if you think otherwise
Yes I agree and, for example, this change in mortality rates will impact on your Solvency II BEL and IFRS fulfilment cashflows (ie reserving). 1495_sc, your other thoughts are all valid. With capital management, we can also think of internal capital requirements, ie the economic capital, not just regulatory capital.
