FSC Publishes “Guidelines on Climate-related Financial Disclosures of Insurance Companies” for Insurers to Begin Disclosure of Financial Information on Climate-Related Risks Starting from 2023
To promote the core strategies for the development of sustainable finance in the “Green Finance Action Plan 2.0” and strengthen insurance companies’ management of climate-related risks, the Financial Supervisory Commission (hereinafter referred to as the “FSC”) referenced the “Recommendations of the Task Force on Climate-related Financial Disclosures” published by the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB), related guidelines and regulations of financial supervisory authorities of different countries, and actual operations of insurance companies to establish the “Guidelines on Climate-related Financial Disclosures of Insurance Companies”. The Guidelines are expected to be implemented starting from 2022 and insurance companies are required to disclose climate-related financial information for the previous year before the end of June each year starting from 2023.
The FSC stated that the “Guidelines on Climate-related Financial Disclosures of Insurance Companies” require insurance companies to establish appropriate mechanisms for climate-related risk management and opportunities based on the scale and nature of their business activities. They must disclose information on climate-related risk management in terms of governance, strategies, risk management, and metrics and targets. They must also establish relevant internal regulations and mechanisms, and regularly review them to ensure that they comply with the requirements in the Guidelines. As the integration of the climate-related financial information disclosure framework and standardized indicators must be established gradually, the FSC references international practices and adopts a gradual approach to the contents of disclosure. Insurance Companies are required to disclose information regularly at the beginning of the implementation of the aforementioned Guidelines and to adopt a gradual approach to the contents of disclosures. The FSC shall provide flexibility for insurance companies to explain matters that cannot be disclosed or cannot be disclosed in detail, and it shall guide insurance companies to increase the amount of information in their disclosures and strengthen the qualitative or quantitative contents of their disclosures each year.
In addition, considering that the financial institutions usually manage the climate-related risks and opportunities at a group view, subsidiaries of domestic financial holding companies or insurance companies may disclose the related information with their parent companies.
To ensure compliance by the insurance companies, the FSC has requested the Life Insurance Association of the Republic of China and the Non-Life Insurance Association of the Republic of China to form a project team in response to the needs of the insurance companies. The team is going to draw up the manual for climate-related financial disclosure to help insurance companies successfully process related disclosures. Sustainable finance is the core of financial development policies. The FSC aims to use the Guidelines to enhance the quality and transparency of ESG information disclosed by insurance companies and strengthen the disclosure of climate-related information. The Guidelines will also encourage the insurance industry to examine its own risks and capabilities in response to climate change, enhance operational resilience, and leverage the guidance of financial market mechanisms to fulfill the roles and functions of financial system for promoting sustainable development of the society as a whole.