UK SRS S2 for Insurers: Underwriting, Investments and Climate Resilience

Educational practitioner material. Illustrative examples and wording require adaptation and technical review.

An insurer can be exposed to climate change through at least two economically different portfolios. The underwriting portfolio creates exposure to claims, pricing, coverage availability, accumulation, litigation and reinsurance. The investment portfolio creates exposure to issuer and asset-level transition and physical risks and gives rise to the financed-emissions disclosures in B63-B63A. A credible UK SRS S2 report connects the two without merging their metrics.

The distinction became clearer through the 2025 amendments. The financed-emissions requirements for insurance concern financial activities associated with the insurer's loans and investments. They do not require the underwriting portfolio's insurance-associated emissions to be included in the B63 financed-emissions subtotal. An insurer may calculate insurance-associated emissions using a separate method such as PCAF Part C, but the metric must be labelled and governed separately.

The insurer resilience map separates underwriting and investment portfolios, then connects them through scenario analysis, capital capacity, management actions and evidence.

The sustainability disclosures cover the same reporting entity as the related financial statements. Within that perimeter, the insurer should map legal entities and activities across life, general, reinsurance, asset-management and banking operations. The map should identify which investment assets fall into B63-B63A, which managed assets fall into B61, and which underwriting activities are outside the financed-emissions subtotal but remain relevant to risk, strategy, industry metrics and targets.

B63 requires absolute gross financed emissions, disaggregated by the financed portion of counterparty Scope 1, Scope 2 and Scope 3 emissions for each industry by asset class. It also requires gross exposure in the presentation currency, coverage, exclusions and methodology. Funded gross exposure is the funded carrying amount before loss allowance; full undrawn commitments are disclosed separately. B63A sets the industry-classification and minimum asset-class requirements.

The insurer should not assume that an asset-owner portfolio can reuse an asset-manager report without adjustment. The reporting entity, ownership, gross-exposure denominator, attribution method, look-through approach, data period and treatment of derivatives may differ. Third-party manager data can be an input, but the insurer remains responsible for the boundary and published disclosure.

Insurance-associated emissions seek to attribute emissions to underwriting activity. They answer a different question from financed emissions and can have different product scope, attribution factors and data inputs. UK SRS S2 B63-B63A do not convert that separate metric into a required financed-emissions table. Paragraph 29A permits Category 15 to be limited to financed emissions, so underwriting-related emissions may sit outside the Category 15 number when the limitation is applied.

That does not make underwriting irrelevant. Material underwriting transition risks, physical risks, opportunities, targets and industry metrics still require analysis and disclosure under the four pillars. If the insurer reports insurance-associated emissions voluntarily or under another requirement, the annual report should label them separately and reconcile any differences in product, geography, period and data coverage.

Physical climate risk can affect the frequency and severity of claims, geographic accumulation, the availability and price of reinsurance, repair-cost inflation, business interruption, mortality or morbidity assumptions and the insurability or affordability of products. The relevant risk depends on product, peril, geography, contract duration and the ability to reprice, redesign coverage or withdraw.

The materiality assessment should not stop at historical claims. It should identify forward-looking vulnerabilities and concentrations, including locations where model confidence is weak, assets where adaptation is not reflected in data and products where policyholders may be unable to afford risk-based pricing. The disclosure should distinguish actual current effects from anticipated effects and explain how underwriting actions affect customers and the business model.

Transition risk can arise from changes in regulation, technology, litigation, consumer preferences and market demand. In underwriting, it may affect insured sectors, liability claims, product demand and the acceptability of providing cover. In investments, it may affect issuer cash flows, asset values, credit quality, liquidity and the insurer's ability to meet liabilities. The same sector can therefore create both premium and asset-side exposure.

Map underwriting sectors and investment issuers to common transition drivers while preserving separate metric populations.

Identify liability-duration and asset-duration mismatches under transition and physical pathways.

Assess litigation and legal-risk channels for both insureds and the insurer’s own public claims.

Consider whether exclusions, pricing or portfolio shifts create concentration, affordability or strategic trade-offs.

Document how climate opportunity products, adaptation services and investment allocation affect the resilience assessment.

UK SRS S2 requires climate-related scenario analysis as part of the climate-resilience assessment. For an insurer, separate modelling teams often analyse catastrophe risk, asset risk, life liabilities and capital. The UK SRS disclosure should connect those analyses into a coherent view of business-model resilience rather than present unrelated model outputs.

A proportionate first cycle can use a small number of plausible scenarios, material lines and geographic concentrations, with quantitative analysis where capabilities support it and qualitative analysis elsewhere. The report should explain scenario sources, assumptions, limitations, model coverage, update cycle and why the approach is commensurate with the insurer's exposure and resources.

UK SRS S2 requires industry-based metrics associated with the entity's business models and activities. In determining the metrics, the entity may refer to the ISSB Industry-based Guidance; the specific guidance is not mandatory in the UK. An insurer should select metrics that help users understand material risk and opportunity, not copy every candidate metric.

Investment-portfolio financed emissions, gross exposure, coverage and classification under B63-B63A.

Catastrophe exposure or loss information, with clear distinction between actual loss, modelled loss and insured value.

Exposure by material peril, geography, product line or reinsurance structure where it informs physical risk.

Premiums or products associated with climate solutions, adaptation or low-carbon technologies, with controlled definitions.

Underwriting or investment integration metrics showing how climate factors enter decisions and monitoring.

Insurance-associated emissions where the insurer determines the metric is material and the methodology is sufficiently mature, clearly labelled as separate from financed emissions.

Metric selection should be documented against materiality, comparability, decision usefulness, methodology maturity and evidence. Size alone is not a reason to omit an industry metric if the information could influence primary users, and a published sector metric is not automatically material for every insurer.

An insurer may set investment-portfolio emissions targets, underwriting-portfolio targets, catastrophe-risk or adaptation targets, sustainable-product targets and operational targets. Each target needs its own boundary, metric, base period, time horizon, methodology and progress explanation. A single group-level 'net zero' statement can obscure whether it covers investments, underwriting, operations or all three.

Insurer reporting often depends on models, external managers, catastrophe vendors, claims systems and investee data. The evidence architecture should therefore show data lineage, model ownership, version control, assumptions, expert judgement, limitations and independent review. It should also reconcile the narrative to underwriting and investment committee decisions, risk appetite, capital planning and the related financial statements.

Investment-portfolio emissions are often reported by asset managers or investees after the insurer's financial close. The insurer should first apply the Scope 3 estimation hierarchy and assess whether reliable same-period information can be produced. If that remains impracticable after every reasonable effort, B59A requires the reason, the measurement approach, inputs and assumptions for any information reported, and a plan with a timeline.

The B59A explanation should identify the affected asset classes or mandates and the period used. It should not be used to justify missing underwriting metrics, because B59A is specifically about financed emissions. Any use of the separate C4 Scope 3 provision should be disclosed distinctly alongside the UK SRS S2 compliance statement.

Category 15 route: document the treatment of underwriting, derivatives and other excluded financial activities.

Timing route: use the B59A guide for lagged investment-manager and investee data.

Bank route: apply B62 separately where a group participates in commercial banking.

Asset-management route: apply B61 separately to third-party AUM managed within the group.