Beyond Compliance: Navigating the Complex Landsc...

Shaheen RazzaqSeptember 16, 2024

With escalating climate-related losses and a rapidly evolving business and regulatory environment, (re)insurers face increasing scrutiny regarding contributions to greenhouse gas (GHG) emissions from their underwriting portfolios, with the ability to effectively identify, manage, and understand insurance-associated emissions becoming paramount.

In response to these demands, (re)insurers must provide diverse stakeholders with clear, traceable, and credible insights into their emissions footprint.

Even with the introduction of Partnership for Carbon Accounting Financial (PCAF) standards nearly two years ago - a significant step towards standardized disclosure of GHG emissions for underwriting portfolios,firms struggle to operationalize sustainability commitments around emissions reporting.

This slow adoption of PCAF standards and the struggle to operationalize them can be attributed to multiple technical and data challenges. For example, insurers need to assign unique emissions data to the accounts in their underwriting portfolio, data that is often sourced from many databases or companies.

Without the use of a standard identifier for insureds, it can be difficult for insurers to match clients in their portfolio to externally sourced emissions data, as insurers often record client entities using descriptive information such as names and addresses.

Furthermore, a scarcity of emissions and financial data, especially for small and medium-sized enterprises (SMEs), can see insurers challenged to estimate emissions from the totality of their diverse portfolio.

Finally, integrating emissions data into complex underwriting and risk management workflows often pushes the limits of many firms' IT systems, involving the building of standalone environments or extensive workarounds, resulting in prolonged IT projects that sap the productivity of high-value resources while delaying the visibility needed by both internal and external stakeholders

Although primarily driven by the need to comply with current and anticipated regulations, the journey toward comprehensive emissions reporting also opens the door to deeper insights into the environmental impact of underwriting portfolios.

This understanding can help insurers engage with their insureds around environmental issues, and potentially influence broader industry practices and new products and solutions over time.

However, the immediate benefit lies in the ability to navigate today's and tomorrow's regulatory landscape confidently, ensuring that reporting obligations are met with greater accuracy and reliability.

Introducing Moody's Insurance-Associated Emissions Solution

Recognizing that successful navigation of the complexities of emissions reporting and management in the insurance industry demands sophisticated, cutting-edge solutions, Moody's has leveraged the Intelligent Risk Platform™, with ExposureIQ™ at the forefront, to develop the Moody's Insurance Associated Emissions (IAE) Solution.

The IAE solution offers a comprehensive approach designed to empower (re)insurers to accurately track, manage, and report GHG emissions associated with their underwriting portfolios.

With a number of the world's leading insurers partnering with Moody's and validating this solution through the integration of ExposureIQ, IAE harnesses advanced data analytics, and proprietary algorithms, with a user-friendly interface to simplify an insurer's understanding of their insurance-associated emissions, ensuring alignment with both regulatory requirements and future sustainability goals.

Challenges around effective name-matching are overcome using Moody's extensive data sets for both public and private entities and allowing for relevant data enrichment data points. This ensures a high degree of accuracy in matching emissions data with entities within an underwriting portfolio.

Integrating proprietary data and employing innovative estimation methodologies within the Intelligent Risk Platform, Moody's IAE Solution then addresses the challenge of limited emissions and financial data from SMEs.

This strategy enables insurers to compile a comprehensive and accurate emissions footprint of their portfolio, even in cases where public sustainability disclosures are scarce.

ExposureIQ is built on a modern, cloud-based infrastructure that is scalable and capable of processing large volumes of data efficiently, addressing common IT and performance bottlenecks. Its user-friendly interface makes emissions data analysis and reporting accessible and efficient across the organization.

With its robust tracking and reporting capabilities, the IAE Solution ensures insurers are prepared for GHG emissions disclosure regulations and facilitates adaptation to future regulatory changes.

It also supports transparent communication with stakeholders, allowing firms to demonstrate their often publicly committed sustainability goals effectively and bolster their reputation and trust.

Beyond addressing the immediate challenges of emissions reporting, Moody's IAE Solution empowers insurers to leverage emissions insights for strategic growth aligned with sustainability objectives.

The solution's analytics capabilities identify opportunities in sustainable sectors, optimizing product offerings and positioning insurers as leaders in environmentally aware insurance solutions.

Embracing the Future: Pioneering Emissions Reporting with Moody's IAE Solution

The insurance industry stands at the crossroads of regulatory compliance and the urgent need for sustainability, and the challenges of accurately tracking, managing, and understanding GHG emissions have never been more pronounced.

From the intricate task of insured name matching to bridging data gaps for SMEs to streamlining complex workflow integrations and addressing IT and performance bottlenecks, insurers and reinsurers face a multifaceted challenge that demands a sophisticated solution.

As we look ahead, the importance of reliable, comprehensive emissions reporting will continue to grow. Regulatory pressures will intensify, stakeholder expectations will evolve, and the imperative for sustainable business practices will become more critical.

In this dynamic environment, Moody's IAE Solution stands as a pivotal resource not just for insurers and reinsurers committed to navigating these challenges but thriving through them.

To find out more about Moody's Insurance Associated Emissions Solution, please register for our webinar on October 8, 2024, here.

Shaheen Razzaq

Senior Director, Product Management, Moody's

Shaheen has over a decade of experience delivering risk management solutions to insurance and reinsurance companies. As a Senior Director within Product Management at Moody's, he is responsible for introducing new, innovative applications to the market.

Before joining Moody's, Shaheen was Risk Aggregations Business Unit Manager at Room Solutions Ltd. and led a department that designed and developed Exact Advantage, a popular, next-generation offshore energy risk aggregation tool. At Room Solutions Ltd, he then managed a global development team that built and successfully implemented several contract and exposure management solutions for large European commercial insurance organizations.

As a regular speaker at industry events, Shaheen often gives presentations about the business value technology delivers to organizations that manage catastrophe and non-catastrophe risk.

Shaheen holds a master's in business and information technology from Kingston Business School.

• #PCAF
• #Partnership for Carbon Accounting Financial
• #Moody's Insurance Associated Emission
• #ExposureIQ
• #Intelligent Risk Platform
• #climate risk
• #climate change