Higher expectations for second year climate statements: Key insights for insurers

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    05 August 2025

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In December 2024, the Financial Markets Authority (FMA) published its ‘Climate-related Disclosures: Insights from our review’ report (FMA Insights Report) which remains the best available guide to the regulator’s view of what should be improved in year two, under New Zealand’s mandatory climate-related disclosure (CRD).

Of the 16 “large” licensed insurers (CREs) , who are subject to the CRD regime, six have already lodged their second year’s climate statement, as at 16 July 2025. We are looking forward to the remaining insurers that are left to lodge in the balance of this year or by 30 January 2026. 

This article is aimed mainly at that latter group who are currently working on what year 2 CRD will look like for them. It shares our observations of the climate statements lodged to date, feedback from the regulators (especially the FMA’s Insights Report), and learnings from a research report by Mosaic Financial Services Infrastructure (Mosaic FSI) on metrics and targets, which was released on 23 June 2025. 

Why CRD matters to insurers

Climate risk is not a distant or abstract concern for the insurance sector  it is core business. From underwriting and claims to solvency and reinsurance pricing, climate change is already reshaping the risk and investment landscapes. The physical impacts of more frequent and severe weather events, the transition risks arising from policy and market shifts, and the liability risks all have the potential to directly affect insurers’ bottom lines. Insurers must demonstrate that they understand and are actively managing climate risk, or risk losing the confidence of regulators, investors, and policyholders alike.

As section 19B of the Financial Reporting Act 2013 says:

The purpose of climate standards is to provide for, or promote, climate-related disclosures, in order to: 

  • Encourage entities to routinely consider the short-, medium-, and long-term risks and opportunities that climate change presents for the activities of the entity or the entity’s group; and
  • enable entities to show how they are considering those risks and opportunities; and
  • enable investors and other stakeholders to assess the merits of how entities are considering those risks and opportunities.

This is reinforced by the “ultimate aim” of Aotearoa New Zealand Climate Standards (NZ CS) which is (as stated in NZ CS 1) “to support the allocation of capital towards activities that are consistent with a transition to a low-emissions, climate-resilient future”.

Both of these emphasise the relevance of understanding climate impacts to an entity’s strategy and risk management. However, how that plays out is different for the three insurer categories: general insurers, life insurers, and health insurers. 

For the seven general insurer CREs, the most immediate implications for their businesses typically come from physical impacts, and their direct consequences. These include increasing claims costs (e.g. due to increasing frequency and severity of weather events), rising reinsurance premiums, and increasing taxes and levies from Fire and Emergency NZ and Natural Hazard Fund. But opportunities are also emerging such as new products like parametric insurance. 

For the nine life and/or health insurers, climate impacts may be harder to assess at this stage. Physical impacts like increasing extreme weather events could lead to increased health risks, which, in turn, could lead to increased demand for cover and increase insurance claims. Some attribute deaths in the current European heatwave to climate change. In the shorter term, it is the transition impacts in investment markets, distribution channels and customer preferences that are emerging. In this, they may have more in common with the CREs who are licensed fund managers, than with the general insurers. One of the particular challenges for health insurers will be whether the GHG emissions of hospitals they pay for are scope 3 “financed emissions” of the insurer.

Regulator guidance from year 1 and increased expectations in year 2

The FMA Insights Report explicitly directs CREs to: 

  • Strike the right balance on the amount of information disclosed: CREs need to weigh the risk of over disclosing, and potentially obscuring material information, against the risk of disclosing too little and omitting material information.

  • Fairly present disclosures: Applying the information and presentation principles in NZ CS 3, in conjunction with the materiality principle, to ensure the disclosure is relevant and useful to primary users. Transparency is the watchword when dealing with the ambiguity and uncertainty inherent in climate-related disclosures.

  • Disclose material information to explain underlying methods and assumptions, and data and estimation uncertainty: This includes the specific requirements for scenario analysis and greenhouse gas (GHG) emissions disclosures.

  • Describe how processes are undertaken and, where required, the frequency of those processes: More than saying processes exist  it’s necessary to provide material information to explain what is involved (i.e. how the process is undertaken), and how often it occurred during the reporting period.

  • Explain the connection between climate-related matters and other organisational activities: To make clear the degree to which the consideration of climate-related risks and opportunities is embedded across an organisation.

  • Understand and apply the meaning of “current climate-related impact”: I.e. when something that has moved from being a risk or opportunity (both future looking) to something that has occurred in the reporting period  i.e. an impact, how the entity has been impacted. 

  • Disclose all material information to explain climate-related risks and opportunities: E.g. providing contextual information (e.g. severity, exposure and vulnerability), and allocating them across the short-, medium- and long-term time horizons). At the same time, the FMA noted it is only those risks and opportunities that are material for CRE’s primary users that should be disclosed. 

  • Disclose all material information to describe GHG emissions targets: Including any “net zero targets”. In particular, disclosures must be clear and transparent when describing why any GHG emissions targets are aligned with limiting warming to 1.5 degrees Celsius.

  • Enhance scenario analysis: E.g. improving disclosure of how scenarios were constructed, and analysed, including all available material information to disclose how that future may play out, and explaining how the CRE’s entity-level scenarios have used (or not) sector-level scenarios. 

  • Ensure CRD is consistent and coherent with other information disclosed: E.g. financial reporting, or product offering documentation.

While some of these directions could have been more focused on other types of CREs (e.g. large NZX-listed entities or banks), insurers would be well-advised to consider the FMA’s expectations of materiality, readability, succinctness, and specificity to them. 

As an example, it is clear the FMA expects CREs to minimise the number of generic statements they make. A key example of a generic statement relates to the impacts of weather events, including Cyclone Gabrielle. From first year climate statements, only one insurer dissected the impact of Cyclone Gabrielle and provided quantified impacts on its business. Other insurers simply stated there was an impact (e.g. by stating an increase in claims) but did not provide any quantitative or qualitative analysis. 

Additional requirements in year 2

In the first year, seven Adoption Provisions were available (and 13 of 16 insurers utilised all of them). In second year statements, NZ CS 2 allows CREs to utilise up to six adoption provisions. Adoption Provisions 1 and 3 now have expired, while a new adoption provision 8 has been introduced exempting CREs from including scope 3 GHG emissions disclosures in the scope of its assurance engagement. 

The effect of this is that in year 2 it is mandatory for CREs to include in their climate statements: 

  • Current financial impacts: CREs must disclose the current financial impacts of their physical and transition impacts, and include an explanation of any quantitative information that is unable to be disclosed, as required by paragraph 12 of NZ CS 1; and 

  • Transition plans: CREs must disclose the transition plan aspects of its strategy, and the extent to which the transition plan aspects of its strategy are aligned with its internal capital deployment and funding decision-making processes, as required by paragraph 16 of NZ CS 1.

In relation to Scope 3 emissions, Adoption Provision 4 (initially set to expire alongside 1 and 3) was extended by the XRB for an additional year. The change was introduced to acknowledge stakeholder feedback in which concerns were expressed regarding the uncertainty and difficulty experienced in gathering scope 3 GHG emissions data. Adoption Provision 8 complements this difficulty by exempting these emissions from assurance requirements. 

Approach so far in year 2

As at 16 July 2025, the six insurers have filed their second-year statements, and it is apparent that they are responding to the FMA’s expectations, in the Insights Report, and the additional requirements. 

Statement style and length:

First year insurer CRE statements range from approximately 19 to 50 pages in length , with all insurers publishing special purpose statements for their CRDs. 

Of the six insurers that have lodged second year statements as at 16 July 2025, we observed:

  • The statements are on average slightly longer than their corresponding first year statements  primarily because of the additional content requirements referred to above with the other text being similar or shorter than the first year. 

  • Two have changed their approach. In year 2, AIA and Partners Life integrated their climate statements into their annual reports by having a climate statement-specific section in their annual reports, so the climate statement remained clearly identified and integration does not impede readers’ access to CRD-required information. Their climate sections are 21 and 22 pages long, respectively. 

  • The four other insurers (Chubb Life, Resolution Life, QBE, and Swiss Re) have maintained the approach of a separate special purpose statements, but they are also typically a few pages longer on average they range from 23 to 34 pages in length.

Across all six, we see a stronger impact of the fair presentation principle in NZ CS 3. For example, we have seen less positive framing and fewer general descriptions in the year 2 statements, with more balanced tones, clearer articulation of risks and stronger acknowledgement of limitations. 

Adoption provisions:

In year 2, there continues to be heavy reliance on the adoption provisions. So far in the second year, four of six insurers have utilised all six now-available adoption provisions. All insurers so far have utilised the new adoption provision 8, so that assurance is not required on scope 3 emissions. 

Governance: 

We observed stronger integration and operationalisation of climate governance within insurer CREs from comparing their year 1 and 2 statements. Insurers have included more details about the frequency at which climate material is considered by various boards, committees, and responsible persons within their entities.

There was also better delineation of climate responsibilities within insurer CREs in year 2. One insurer disestablished its CRD working group as CRD obligations oversight is now embedded in entity processes in year 2, and another insurer established a dedicated climate working group and more clearly defined climate roles. 

One insurer has significantly uplifted its governance section and we look forward to its year 3 statement as it is likely further detail about its groups, committees, and persons involved in climate decision-making will be included. 

Scenario analysis:

In relation to scenario analysis, all six insurer CREs so far utilised the same scenarios in year 2 as they did in year 1. Chubb Life, Partners Life and Resolution Life (three life insurers), continued to use the Financial Services Council recommended scenarios (Orderly, Too Little Too Late, and Hothouse). AIA, QBE, and Swiss Re (one health and life insurer, one general insurer and one reinsurer) again used The Network for Greening the Financial System scenarios (Orderly, Disorderly, Hothouse) which are broadly comparable. 

It makes sense not to change scenarios at this early stage and is, in our view, in line with the NZ CS 3 principle of consistency, enhancing comparability of statements for primary users from reporting period to reporting period. 

Anticipated developments from the remaining year 2 climate statements

We will watch with interest to see whether the remaining insurers remain with the standalone climate statement approach, or follow the lead of the two who have integrated them into their annual report. In terms of other non-insurer CREs, we see both approaches. But the standalone climate statement, or a statement integrated into a wider sustainability report seems to be favoured by the strong majority of large financial institutions. Either way, as the FMA’s Insights Report points out, it is important that the climate statement and other reporting such as financial statements are compatible. 

We do expect CRD statement length to among the remaining insurer CREs yet to lodge either be similar to year 1. Statements from the first to second year should not vary hugely in length. Some of the disclosures required last year may be able to be shortened as CREs focus on the fundamental NZ CS 3 principle of fair presentation.

At the same time, the two new, additional disclosure requirements for current financial impacts and transition plans are likely to require CRE’s to add more pages. There may also be additional material required, if it is necessary to restate any FY24 disclosures. The FMA has flagged that it expects that there may be errors in the early years, and drawn attention to the requirement to restate in the subsequent year’s climate statement under NZ CS3. 

We expect all remaining CREs, including insurer CREs, will also reduce the number of generic statements made in their disclosures in the second year. This includes CREs clearly stating how CRD information is dealt with within the CRE: by whom (the Board and any relevant committees), what format the information is presented, how many times CRD information is reviewed, and the level of engagement with the CRD. This was specifically called out in the FMA’s Insights Report. 

CREs must disclose information in a manner that is relevant, accurate, balanced, and comparable, among other principles. With the breadth of CRDs filed across all types of reporting entities, we expect insurers to be able to better strike the balance between disclosing too little and too much information better in their second year statements.

Finally, in the process of assisting fund managers with preparing their FY25 climate statements (which typically have a 31 March year end), we have seen careful consideration of potential transition impacts on investments due to Donald Trump becoming President and his Executive Orders rolling back climate initiatives of the prior US government. While there is arguably a material transition impact that could be described qualitatively, it was not possible to quantify it separately from the impacts the non-climate related executive orders made at the same time. And we also note the impact on stock indexes in the last quarter of their reporting periods largely rebounded in the following quarter (i.e. after the end of the reporting period).

We expect insurers, particularly life insurers, whose businesses also have significant investment portfolios, may also need to consider whether these impacts were material current financial impacts for them.

Other insights

Mosaic FSI recently published a CRD research report on registered bank and building society (BBS) and insurer year 1 climate statements against the metrics and targets requirements in the climate standards. MinterEllisonRuddWatts provided legal input to that report. 

Mosaic FSI found that there is a statistically significant difference in approaches to investment emissions disclosures between insurers and BBSs, with only 13% of insurers reporting values compared to 38% of BBSs. Leading CREs were often able to provide more specific metrics and targets and compare data spanning over a greater period to clearly demonstrate the effects of their climate strategy. 

However, the small sample size makes the analysis very sensitive and these differences may be as a result of the fundamentally different natures of the BBS business (primarily deposit-taking lenders) versus the insurers who face methodological barriers and limited access rights to client emissions data. Also, as we point out above, the insurance sector itself can be split between general insurers and life/health insurers given their respective businesses are significantly different. 

Despite those limitations, the report provides useful food for thought going into year 2. 

Please get in touch with one of our experts if you would like to discuss any of our observations and insights above, or your climate reporting obligations generally. 

Footnote: 

[1] Statement length is determined by the page numbering contained on each statement. 

This article was co-authored by Darlene Hu, a Solicitor from our Financial Services team.