Net Zero Plans Assists Insurers Manage Carbon Transition Risks: Moody’s
Net zero PPlans Assists Insurers Manage Carbon Transition Risks: Moody’s
In order to measure carbon transition risk, which in turn puts insurers in a better position to manage it, net zero objectives call for significant organizational focus and investment, according to a recent Moody’s Investor’s Service analysis.
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According to Moody’s, the most credible plans are built on strong and transparent foundations, include quantifiable intermediate goals, and cover all types of emissions produced by insurers.
However, it also notes that the level of detail provided by international insurers regarding their interim goals and plans to eliminate emissions varies.
Moody’s notes more European insurers than Asian or North American peers have joined net zero alliances, and generally, have clearly defined goals and implementation plans.
Meanwhile, most non-alliance members have less well-developed plans to manage this risk and appear to be following a more flexible approach.
Net Zero Plans Assists Insurers Manage Carbon Transition Risks: Moody’s
The firm also observes that the industry’s plans to eliminate financed and insured emissions rely on government action, citing the requirement that companies report accurate emissions data.
Measuring emissions in insurers’ investment and insurance portfolios also requires tools and data that are not yet widely available, says Moody’s, adding that insurers risk losing business or investment portfolio diversification if they decarbonize too quickly or without a well-reasoned plan.
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Moody’s also states that insurers are exposed to carbon transition risk through the investments they hold on a balance sheet, and through the premium revenue they generate from clients in carbon-intensive sectors.
It adds that investment risk is greater for life insurers because of their higher asset leverage. European insurers tend to have less investment exposure to carbon-intensive sectors than their North American and Asian peers.
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