In keeping with the conference theme of “Seeking Better Returns in the Current Volatile Climate” – I would like to discuss the investment challenges facing insurers, as well as share my observations on key issues that insurance companies would need to address in this new investment landscape. 6. This is important because as many of you know, insurers operate in a multistakeholder environment. They need to first offer competitive products to policyholders to meet their needs, maintain adequate capital to meet regulatory requirements, as well as provide adequate shareholder returns. The insurance industry’s targeted return corridor to policyholders can be at least 3–5%2 in order to maintain bonus payouts for participating policies; whilst the ROE to shareholders have typically ranged between 10%–15%3. In the case of life insurers, in particular, for which investment returns is a key source of income given their focus on long-term and guaranteed savings products, lower returns will strain the ability to meet both policyholders’ and shareholders’ expectations. Some insurers have ventured to forecast that a 10% ROE for the industry will be a “best-case scenario”, with many more calling for the industry to be more realistic about its return expectations from their investment portfolios. Challenging investment landscape 7. Let me first discuss the investment headwinds facing insurers. Specifically, there are 3 key challenges that are driving insurers to undergo a fundamental rethink of their investment approach: a. One, lower returns in the new normal;  b. Two, lack of long duration assets; and  c.  Three, regulatory reforms.

The TCFD delivered – to the Hamburg G20 Leaders’ Summit last year – final recommendations for voluntary disclosures of material, decision-useful climate-related financial risks.9 Suitable for use by all companies that raise capital, the recommendations:   Include disclosure of governance, strategy and risk management;    Establish consistent and comparable metrics and targets applicable across all sectors, as well as specific metrics for the most carbon-intense industries;    Encourage use of scenario analysis in order to assess the potential impact of the risks and opportunities of the transition to a low carbon economy on strategy and financial planning. The combination of the Paris Accord and the TCFD has led a clear transition in thinking and action about climate-related financial risks. Consider the changes in demand, supply and impact of climate disclosure. The demand for climate-related financial disclosure from the providers of capital has increased significantly. Current supporters of the TCFD include three-quarters of the world’s globally systemic banks, 8 of the top 10 global asset managers, the world’s leading pension funds and insurers, major credit rating agencies, the Big Four accounting firms, and the two dominant shareholder advisory service companies. These financial firms are responsible for managing nearly $ trillion in assets (or 20% more than global GDP). With climate-related shareholder resolutions tripling last year and litigation risks rising, the incentives for companies to disclose and manage climate-related risks have increased dramatically. Not surprisingly, the supply of climate disclosure is responding.