Discussion Paper - Disclosure of Climate Change Risks for Commercial Insurers (2023-09)

Summary

This is a Discussion Paper issued by the Bermuda Monetary Authority (BMA) seeking industry feedback on a proposed framework for climate-related financial disclosure by commercial insurers and insurance groups. It builds on the BMA's updated Insurance Code of Conduct and its March 2023 Climate Risk Guidance Note, and proposes aligning disclosure expectations initially with the Task Force on Climate-Related Financial Disclosures (TCFD) four-pillar framework (governance, strategy, risk management, metrics and targets), while noting future potential alignment with ISSB standards.

• Scope: Proposed to apply to all commercial insurers (Classes 3A, 3B, 4, C, D, E) and insurance groups regulated by the BMA.
• Disclosure content: Insurers would disclose climate risk exposure, mitigation and monitoring across underwriting, investments and operations, following TCFD's four pillars and using core investment and underwriting climate risk metrics.
• Proportionality: Level of detail expected to reflect each insurer's size, complexity and risk profile; insurers concluding climate is not material must expressly state this and justify the conclusion.
• Phased implementation (proposed): Groups would report first for financial year-end 2024, Class 4 and Class E insurers from year-end 2025, and Classes 3A, 3B, C and D from year-end 2026.
• Consultation questions: The paper poses specific questions (e.g. on scope, phasing, thresholds for small commercial classes, and simultaneous reporting for Class 4/E and Groups) for stakeholder response.

As a discussion paper, none of the proposed disclosure requirements are yet binding; the BMA states a subsequent Consultation Paper will follow to finalise the approach and regulatory implementation. The only current action required of readers is to submit feedback using the prescribed Excel response form by the stated deadline.

Key obligations

• Interested persons wishing to comment must submit responses using the Appendix C Excel response form to climaterisk@bma.bm before the 15 December 2023 deadline, with the company name and 'Discussion Paper – Disclosure of Climate Change' in the email subject line.
• (Proposed, not yet final) Insurance groups would need to publish their first climate disclosure report for financial reporting periods starting at year-end 2024.
• (Proposed, not yet final) Class 4 and Class E commercial insurers would need to begin climate disclosure reporting at year-end 2025.
• (Proposed, not yet final) Class 3A, 3B, C and D commercial insurers would need to begin climate disclosure reporting at year-end 2026.
• (Proposed) Insurers concluding that climate risk is not material to their business should expressly state this conclusion and provide supporting rationale in their disclosure.

Applies to

commercial insurers (Classes 3A, 3B, 4, C, D, E), insurance groups

Deadlines

• 15 December 2023: Deadline for industry and stakeholder responses to the Discussion Paper, to be submitted via the Appendix C Excel form to climaterisk@bma.bm.
• year-end 2024: Proposed start of first climate disclosure reporting period for insurance Groups (subject to consultation feedback).
• year-end 2025: Proposed start of climate disclosure reporting for Class 4 and Class E Commercial Insurers (subject to consultation feedback).
• year-end 2026: Proposed start of climate disclosure reporting for Class 3A, 3B, C and D Commercial Insurers (subject to consultation feedback).