WEBVTT 00:00:02.000 --> 00:00:16.000 Hello everyone and welcome to our first technical webinar on PCAF's new public consultation. 00:00:16.000 --> 00:00:23.000 Last year in December PCAF launched a public consultation on new methods and guidance. 00:00:23.000 --> 00:00:27.000 And now in January, February we are going to do these 00:00:27.000 --> 00:00:37.000 technical webinars, deep diving into the methods that we launched. And today we will be focusing on the insurance methodologies. 00:00:37.000 --> 00:00:54.000 So the plan of the session, I just want to do a quick introduction and opening And then we'll go through project insurance. We have both co-chairs of these groups to present you these methods Then we'll have a Q&A after the project should be around 10 minutes. 00:00:54.000 --> 00:01:12.000 And then we'll follow the same format for treaty reinsurance. So you'll have time to ask to the chairs questions on the methods really try to understand and help you Which then for your submission of the feedback to the consultation. 00:01:12.000 --> 00:01:16.000 Um so Just a bit of housekeeping. 00:01:16.000 --> 00:01:20.000 The purpose of the session is really to deep dive into the methodologies. 00:01:20.000 --> 00:01:36.000 So the questions should be focused on questions on the methodologies and And the document itself and it should not be focused on feedback. So really try to reframe your questions to be based on giving feedback to the methods and actually more questions to help you when 00:01:36.000 --> 00:01:45.000 You do submit the feedback through the survey. Also, attendees are in listen-only modes. So if you want to ask questions, please use the Q&A function. 00:01:45.000 --> 00:01:51.000 That you'll find at the bottom. And then we'll go through all of the questions during the Q&A part. 00:01:51.000 --> 00:01:55.000 If you have any difficulties using the Q&A or any other function. 00:01:55.000 --> 00:02:02.000 Then just please write in the chat and someone from the PCAF secretariat will try to help you with that. 00:02:02.000 --> 00:02:09.000 And also this webinar is being recorded. So if, for example, you want to watch it back or some of your colleagues couldn't make it. 00:02:09.000 --> 00:02:14.000 Know that it is being recorded and will be added to the PCAF website afterwards. 00:02:14.000 --> 00:02:19.000 So you can always refer back to the recording. And if there's any questions, if you want to contact us. 00:02:19.000 --> 00:02:26.000 You can always reach us at info at carbonaccountingfinancials.com. With questions you may have. 00:02:26.000 --> 00:02:31.000 And I think let's kick it right off, starting with project insurance. 00:02:31.000 --> 00:02:42.000 Well, obviously, who do we have from the chairs today? So we have both Hannah from Allianz and Daniel from Swiss Free. 00:02:42.000 --> 00:02:45.000 I want to thank both of them for being here today. 00:02:45.000 --> 00:02:55.000 So Daniel was leading the work on treaty reinsurance. And Hannah was leading the work on project insurance and they will both walk you through these methodologies today. 00:02:55.000 --> 00:03:06.000 Help you with the Q&A and the questions. And these are really the experts, the right people that helped develop these methods that led the development. 00:03:06.000 --> 00:03:16.000 So we're very happy to have them here today. So I will hand it over to Hannah now to walk us through product insurance. 00:03:16.000 --> 00:03:21.000 Great. Thanks, Madalena and welcome all. Thanks for joining today's session. 00:03:21.000 --> 00:03:33.000 Just by way of an introduction, my name is Hannah Speakman. I work at Allianz SE, particularly within the sustainability team within our global PNC. 00:03:33.000 --> 00:03:52.000 Department and as mentioned, we led the work on project insurance so I will be taking you through the methodology that we created today. And as mentioned, feel free to please ask any questions as we go through. 00:03:52.000 --> 00:04:05.000 So firstly, then just looking at the topic of line of business and how he went about deciding what would and would not be in scope of the methodology. 00:04:05.000 --> 00:04:32.000 So we started by discussing all lines of business that would be project and those that we considered to be relevant and potentially possible to be included was construction or risk erection or risk, inherent defect insurance and also security insurance, as you can see on the left hand side of the screen there. 00:04:32.000 --> 00:04:44.000 Following various discussions as we worked through drafting the methodology we kind of came to a decision on what would and wouldn't be included. 00:04:44.000 --> 00:04:51.000 Within the methodologies and you can see the reasons for those decisions on the right hand side. 00:04:51.000 --> 00:05:14.000 So it was felt that construction or risk, erectional risk and inherent defect insurance were to be included in this iteration of the methodology. They fit with what we started to develop in terms of the methodology and aligned with various aspects. 00:05:14.000 --> 00:05:24.000 Of it. However, we did make the decision to remove surety from this particular iteration of the methodology. 00:05:24.000 --> 00:05:48.000 And the reasoning for that was that we did find there was links to other methodologies, particularly under the financed emissions standard. And we did have discussions with the colleagues who were working in on that standard and in that area. And after those discussions, we found it would be quite difficult to align 00:05:48.000 --> 00:05:58.000 This version of the methodology with a methodology that suited surety and also aligned with what was being developed within financed emissions. 00:05:58.000 --> 00:06:16.000 It was also found to be quite difficult to include based on the three-way relationship that's in place within surety insurance which is quite different to constructional risk, erectional risk, inherent defect insurance. So that also would have had to have been a different 00:06:16.000 --> 00:06:27.000 Consideration and kind of a different part of the methodology. So we did therefore take the decision to remove it, as I say, from this iteration. 00:06:27.000 --> 00:06:52.000 But there is potential to include it in the future. And whilst touching on that topic, I would just take the opportunity to note that what we potentially look at when it comes to insurance methodologies in the future is one of the questions that we have within the survey that has been shared. So if there are particular thoughts around 00:06:52.000 --> 00:07:02.000 Needing the methodology for surety or indeed any other line of business, then please do make sure that you're giving that feedback as part of the survey as well. 00:07:02.000 --> 00:07:09.000 We can get an understanding of what would be kind of a focus topic moving forward. 00:07:09.000 --> 00:07:25.000 So having kind of run through that, we therefore came up with this infographic just to hopefully make it a bit more clearer in terms of what is and isn't in scope and some of the wider considerations that we took as well. 00:07:25.000 --> 00:07:43.000 So this graphic is included in the methodology and it just gives an idea of the insurance policies covered by the methodology so you can see that how the CAR and EAR policy fits. So that's kind of the dark orange line. 00:07:43.000 --> 00:07:49.000 And also how we see IDI insurance fitting within that kind of chain of events as well. 00:07:49.000 --> 00:07:59.000 With the lighter orange line. And how that overlaps in terms of the construction process. So in terms of when the construction begins, when the practical completion. 00:07:59.000 --> 00:08:09.000 And it's the point at which there's a practical completion and then all the way up to that end of kind of useful life of the project as well. 00:08:09.000 --> 00:08:34.000 And then here we just also included some other considerations such as the property policy, which might also overlap with some of the other policies that we mentioned and therefore kind of taking note that there could potentially be some double counting within the methodology and so not something that we ignored, but equally something that's noted as a potential 00:08:34.000 --> 00:08:45.000 Limitation of the methodology. So hopefully just a graphic to make it clearer and understandable to those reading the methodology. 00:08:45.000 --> 00:08:55.000 So once we had a kind of decision on the line of business, we moved on to a similar process, but looking at the emissions to be covered. 00:08:55.000 --> 00:09:00.000 So again, on the left hand side here, you can see the starting point of those discussions. 00:09:00.000 --> 00:09:08.000 So firstly, we identified the project stages that we might need to discuss as part of this emissions coverage. 00:09:08.000 --> 00:09:26.000 So firstly, we looked at what we called the production stage And then we looked at construction followed by use of the project. So the use stage And then also end of life and what happens once the project has kind of reached the end of its useful period. 00:09:26.000 --> 00:09:44.000 And we gave named conventions to each of these stages essentially so you can see them in terms of the cradle to gate And then with the construction stage, kind of the cradle to site, the use stage, including the operational part of the project, so cradle to operation 00:09:44.000 --> 00:09:59.000 And then the end of life including kind of the demolition as being the cradle to grave So once we had those identified, we then looked at what would be the potential associated emissions relevant to each of these project stages. 00:09:59.000 --> 00:10:03.000 And which ones we would look to consider and not consider. 00:10:03.000 --> 00:10:20.000 So again, you can see them noted on the left side there. So we have the construction emissions the lifetime emissions the life cycle and then also consideration around embodied emissions as well. 00:10:20.000 --> 00:10:26.000 So if you move to the right hand side, you can see the eventual decisions that we made. 00:10:26.000 --> 00:10:39.000 Around these emissions. So firstly there we have construction noted. So this is the core activities of the project so looking at the construction stage of the project. 00:10:39.000 --> 00:10:56.000 And here you can see that that was decided to be included in the methodology and also be part of the compulsory reporting. So this is the core activity essentially the project and for this stage as well we found that there is much more data which is more widely available. 00:10:56.000 --> 00:11:20.000 So this has been included in the methodology. We then also looked at what we've called their lifetime emissions. And this is looking at both that construction stage, but also including the use stage as well. And this is felt to be kind of another core activity when it comes to project insurance and it aligns additionally with 00:11:20.000 --> 00:11:46.000 What is within the project finance methodology and also aligns with the ghd protocol. However, we found with that use stage aspect that there are some data challenges So we have therefore included this as voluntary. So it is included in the methodology 00:11:46.000 --> 00:11:59.000 But we wouldn't include it as compulsory at this point because of those challenges. However, it could be something that is considered at a later stage if data does become more widely available. 00:11:59.000 --> 00:12:09.000 On a similar note, we decided to exclude life's cycle. So that's all stages due to those data challenges. 00:12:09.000 --> 00:12:21.000 And in addition, because it didn't align with what is currently being included in other methodologies. We found that that lifetime aligned much more than life cycle. 00:12:21.000 --> 00:12:34.000 And then also we did consider embodied as mentioned, but it was felt that this needed more of a wholesale review across various different methodologies. So we therefore kept it as out of scope. 00:12:34.000 --> 00:12:48.000 For this edition and hopefully there will be additional guidance expected in the future which has that more wholesale approach rather than just looking at those emissions from a project insurance perspective. 00:12:48.000 --> 00:13:07.000 I would just also note here that We mentioned the data challenges quite a lot. And again, as part of The survey, we have asked questions about what data is available and if anyone knows of any data that we potentially might have missed. 00:13:07.000 --> 00:13:19.000 So if there is something that comes to mind, please do include that when filling out the survey as well. It will be really helpful to us to understand what is available in the market, especially as I say, if we have 00:13:19.000 --> 00:13:39.000 Missed something across the working group. So again, as with the line of business, we then included this in an infographic just to make it hopefully a bit more clearer in terms of what we are talking about. So here you can see everything that I mentioned. 00:13:39.000 --> 00:13:55.000 In terms of the different stages of that construction and what we mean in terms of that construction emissions being that construction stage and then the lifetime emissions being the construction stage Plus the use stage as well. 00:13:55.000 --> 00:14:07.000 And as I mentioned, this is included in the methodology. So hopefully a useful referral point when reading through just to provide some clarity around what we looked at. 00:14:07.000 --> 00:14:15.000 And what we finally decided to move forward with when developing the methodology. 00:14:15.000 --> 00:14:23.000 Lastly, then, we took a similar approach when looking at the attribution of emissions. 00:14:23.000 --> 00:14:33.000 And again, we looked at what we actually needed to provide with the methodology based on the decisions that we've already One, three. 00:14:33.000 --> 00:14:55.000 So firstly, we looked at the type of policies to be included. So given that we'd already decided to limit the methodology to constructional risk, erectional risk and IDI, We looked at whether there was any specifics that we needed to look into in terms of the policies and now how we would then attribute the emissions. 00:14:55.000 --> 00:15:02.000 And that is why we have separated constructional risk and erectional risk into two different types of policy. 00:15:02.000 --> 00:15:18.000 So firstly, we have the project specific policies and this is where the premium relates directly to the project. So the insurer in most instances will have information on the individual project. 00:15:18.000 --> 00:15:43.000 That is being undertaken as part of that policy. And then secondly, we have what we've called annual premium policies. So this is where the policy doesn't cover a specific project as with project specific policies but ensures the insured for any construction activities that they might undertake during the contract period. So usually during that annual period for which 00:15:43.000 --> 00:15:53.000 The cover is in place and therefore the insurer might have limited information on the individual projects that are actually being undertaken. 00:15:53.000 --> 00:16:05.000 And then lastly, as number three there, we've got the IDI policies, which we felt there was no reason there to kind of separate out as we did with the construction risk and erection. 00:16:05.000 --> 00:16:12.000 Or risk and then obviously as we've discussed when we were looking at this attribution of emissions. 00:16:12.000 --> 00:16:22.000 We were looking to include construction as a compulsory. Reporting of the emissions and then lifetime as voluntary. 00:16:22.000 --> 00:16:34.000 So if we move on to the next slide, you can see here the formulas that were developed for these different contract types. 00:16:34.000 --> 00:16:41.000 And also the different stages of the emissions, so the construction stage versus the use stage. 00:16:41.000 --> 00:17:05.000 Including the various definitions there. So this is included and can be worked through in terms of looking at this in in the methodology, so I won't go through in too much detail but essentially on the left hand side there, we have the policy project policies for construction or risk and erectional risk and then also 00:17:05.000 --> 00:17:22.000 Idi and then on the right side there we have those annual policies that we mentioned as well. So one looks at attributing the emissions based on the value of the project. 00:17:22.000 --> 00:17:39.000 And then the other is looking and focusing more on the revenues based on that that policy being over the course of that yearly period rather than knowing the specifics of the project. 00:17:39.000 --> 00:17:51.000 And then if we move on to move on The next slide, it also includes the attribution of emissions to aggregation approach. 00:17:51.000 --> 00:18:06.000 So given the lines of business that were in scope that it is possible for insurers to write more than one of these lines of business or participate on several layers of a reinsurance or insurance program. 00:18:06.000 --> 00:18:32.000 So we provide here the option of how to aggregate these policies or the emissions as and when needed. So there's an option there for customers with multiple project specific policies And then also customers with multiple annual policies. And again, that is just based on the total value of the project. 00:18:32.000 --> 00:18:45.000 Where it is project specific or based on the revenues where it is an annual policy. 00:18:45.000 --> 00:19:07.000 And I think that is yeah everything in terms of kind of the core content of the presentation So happy to take any questions if there are any questions Already. 00:19:07.000 --> 00:19:13.000 Perfect. Thank you very much, Hannah. And I see no questions yet. 00:19:13.000 --> 00:19:28.000 Please you know even as we're going to the presentation, you can type them in the chat There is one, Hannah. When reporting, should project-specific emissions be annualized? 00:19:28.000 --> 00:19:34.000 Project specific. 00:19:34.000 --> 00:19:40.000 So in terms of, sorry, let me just… 00:19:40.000 --> 00:20:08.000 So the um it should be related in terms of the… calculation. So if we could just go back One slide, I think it would be Yeah, perfect. So in terms of the calculation, it would just be the premium over the the total 00:20:08.000 --> 00:20:21.000 Value of the valley of emissions if i think I've got that question. 00:20:21.000 --> 00:20:32.000 I think we see another one. So someone asks someone asks 00:20:32.000 --> 00:20:33.000 Sorry, yes. 00:20:33.000 --> 00:20:43.000 Are you good? Okay, Hannah? Yeah, okay. What is the best way to estimate project emissions if that data is not collected from the client 00:20:43.000 --> 00:20:58.000 Yes, so we have some data challenges as mentioned. So we do provide some options within the methodology in terms of Data. 00:20:58.000 --> 00:21:23.000 And one of the things that we are also looking into and have mentioned within the methodology as well is the PCAF database and being able to provide this within that database for everyone who has access to it. So hopefully that is something that we would be able to move forward with as well so that where there is that 00:21:23.000 --> 00:21:31.000 Data challenge, that data would be available and so we would we would hope to be able to kind of publish that. 00:21:31.000 --> 00:21:40.000 Ahead of the methodologies being available to make it easier to calculate. 00:21:40.000 --> 00:21:45.000 I see someone also asking someone to go back to the slide. 00:21:45.000 --> 00:21:58.000 So I'll just go back. And in the meantime, there's another question that asks if at Allianz you are able to calculate the project insurance related emissions. 00:21:58.000 --> 00:22:16.000 It's not really something I would want to go into detail on. I would just say that whilst we have been working on the methodology, we have obviously had experts from the relevant lines of business involved in developing this methodology 00:22:16.000 --> 00:22:36.000 So whilst we have kind of been focusing myself from a sustainability perspective, we have also had experts from the relevant underwriting areas and I think that's similar to say in terms of other insurers that were involved as well in terms of having aspects both 00:22:36.000 --> 00:22:45.000 From a sustainability perspective and also from a underwriting perspective as well. 00:22:45.000 --> 00:22:57.000 Great. So more questions coming in. Someone asks, how can you explain the inconsistency in the balance sheet to the single risk business? 00:22:57.000 --> 00:23:07.000 In which the insureds report their issues exposed Here with project policies, the issues must be estimated ex ante. 00:23:07.000 --> 00:23:10.000 Not sure if that was a lot. 00:23:10.000 --> 00:23:16.000 Sorry, sir. It was the… single project 00:23:16.000 --> 00:23:21.000 So how can you explain the inconsistency in the balance sheet? 00:23:21.000 --> 00:23:28.000 To the single risk business in which the insured reports their issues exposed. 00:23:28.000 --> 00:23:37.000 Here with project policies, the issue must be estimated Ex ante. 00:23:37.000 --> 00:23:38.000 He says, not the issues, the emissions. Let me post it in the chat so it's easier. 00:23:38.000 --> 00:24:07.000 Yes. 00:24:07.000 --> 00:24:16.000 Ensure to report their issues. Oh, is that the part that sorry you said emissions 00:24:16.000 --> 00:24:29.000 Yeah, exactly. Emissions. 00:24:29.000 --> 00:24:32.000 Me going into the can you hear me Oh, sorry. 00:24:32.000 --> 00:24:35.000 Yeah, we don't see that. Oh, no, yeah. 00:24:35.000 --> 00:24:39.000 Sorry, I think going into the chat, switched off my microphone. 00:24:39.000 --> 00:24:55.000 Is this, I think maybe would it be were taking some of the questions offline just in terms of being able to then come back with a bit more detail, but I don't know if this maybe reflects in terms of potentially having 00:24:55.000 --> 00:25:03.000 That gap in terms of being able to report emissions. 00:25:03.000 --> 00:25:04.000 Mm-hmm. 00:25:04.000 --> 00:25:16.000 Previous year. And not being fully available at the point they need to be reported um which Yeah, in terms of a time lag, I think is a challenge that is felt in terms of other areas and some of the methodologies that are already 00:25:16.000 --> 00:25:25.000 Implemented. But yeah. It might be easier to kind of take offline if there's potential to do so. 00:25:25.000 --> 00:25:26.000 Yeah, I would suggest send us the question to info at carbonaccounting Financials. 00:25:26.000 --> 00:25:31.000 Thank you. 00:25:31.000 --> 00:25:41.000 And any other questions that you feel we didn't Answer today. And then we can always get back to you with a bit of a more thought out answer. 00:25:41.000 --> 00:25:45.000 And I will put the email. In the chat. 00:25:45.000 --> 00:25:54.000 I think maybe let's do One more. So if the project is three years long, how would we report the emissions? 00:25:54.000 --> 00:26:04.000 Is it going to be annualized or do we count the three-year total in one accounting year? 00:26:04.000 --> 00:26:06.000 Could you just repeat that? Sorry. 00:26:06.000 --> 00:26:11.000 Of course. If the project is three years long, how would we report the emissions? 00:26:11.000 --> 00:26:20.000 Is it annualized or do we count the three-year total in one accounting year? 00:26:20.000 --> 00:26:32.000 So the discussions if i remember when we were working through in terms it was felt that it would be on the annualized basis. 00:26:32.000 --> 00:26:39.000 And yes. It's reported each year. 00:26:39.000 --> 00:26:54.000 But again, yeah, happy to take thoughts and any feedback and maybe that's something that we can take away in terms of if it's not clear in the methodology as well then that's something to tidy up and make a bit clearer for 00:26:54.000 --> 00:26:56.000 The future. 00:26:56.000 --> 00:27:11.000 Yeah, perfect. We obviously want to get as much feedback as possible and if you feel like there is no question that is addressing the feedback you would like to get. There's always a general one. 00:27:11.000 --> 00:27:15.000 That you can drop any other comments that you might have. 00:27:15.000 --> 00:27:23.000 So you can give us your feedback on the methodologies. So thanks, Hannah. 00:27:23.000 --> 00:27:29.000 I think hopefully people got a very good understanding of the product insurance. 00:27:29.000 --> 00:27:41.000 Methods and I do want to now hand it over to daniel who will walk us through a bit the 3D reinsurance methods And then we'll have another section for Q&A focused on the treaty. 00:27:41.000 --> 00:27:43.000 Over to you. 00:27:43.000 --> 00:28:03.000 Thanks, Madalena, and thanks for everybody joining. My name is Daniel Stipe, as mentioned, I'm working at 33 in the group sustainability reporting unit and i've been working with nine other colleagues in this working group to develop the standards and it's great I can present it to you here 00:28:03.000 --> 00:28:12.000 I was already involved in the first version of the PCAF standard in the work groups at that time. So it's great to continue there. 00:28:12.000 --> 00:28:19.000 Maybe to start off for those that are not so familiar with treaty reinsurance and reinsurance in general. So very quickly. 00:28:19.000 --> 00:28:39.000 Treaty reinsurance is a form of an insurance contract where every insurance company automatically provides cover For all insurable assets that the primary insurance companies underwrites during a period that fall into a predefined specifications so it could say all motor insurance policies 00:28:39.000 --> 00:28:55.000 In a given country, a given region for a line of business in an industry or it could also be limits by the the size of an asset so the the revenues of an insured company or so on. So it's kind of an automatic reinsurance 00:28:55.000 --> 00:29:18.000 Capacity that is provided and important to know is that it's basically this is the largest the majority of reinsurance business is treaty reinsurer. So it's anywhere between 70 and 90% of a typical reinsurance companies is in the form of treat to insurance versus facultative for single risk insurance where 00:29:18.000 --> 00:29:38.000 You look at each individual risk. So it's clear that for deer insurance industry, it's important to have a methodology here. And also what you can imagine, I mean, if you have a contract for all the risks in a given region or country, there's many, many insurable objects that are reinsured by reinsurer. 00:29:38.000 --> 00:29:56.000 And depending on the line of business and the country and so on the reinsurance companies have varying degree of transparency on the underlying risk, so the individual risks which are basically covered within the reinsurance contract and the limited amount of data and 00:29:56.000 --> 00:30:20.000 That gives me over to kind of the motivation and on the development. So it was really to take to into account the today's situation on how much data is available to the reinsurers and find an efficient approach considering state limitations and also avoid double efforts and inconsistency between primary insurance reporting and reinsurance. 00:30:20.000 --> 00:30:41.000 Reporting. So that was the starting point. And in the slide that is shown This basically shows you the the fundamental logic behind the approach it's it's quite a simple thinking and you may know that the the principle to be followed under the PCAF standard that was defined in the first version is 00:30:41.000 --> 00:30:58.000 This aspect of following the risk And in the first developments we had lots of discussion how to define risk what measure we could use. You could look at capital requirement, expected losses from a reinsurance contract. 00:30:58.000 --> 00:31:17.000 And in the end. We came to premiums as an indicator as you've just seen for the commercial insurance approach as well and and the assumption is basically premiums are approximation of the risk that is paid by the primary insurance or by the insured 00:31:17.000 --> 00:31:40.000 So the primary insured company and also by the reinsurance and the primary insurance company so that indicates the level of risk involved and transferred between the different parties. And the idea for this treatery insurance approach very simply is basically where in the end 00:31:40.000 --> 00:31:58.000 The premium lens the actual retained premium the risk and the emissions should land. So here you can see that the whole circle is basically the whole premium that is sourced from the primary insurer and then the part goes to sometimes the brokers 00:31:58.000 --> 00:32:12.000 A part is going to the primary insurance companies and he will provide a premium to the reinsurance to that cover which is kind of the I don't know what that color is. 00:32:12.000 --> 00:32:29.000 On the left top, that part is seated to the reinsurance company and then there's other brokers involved on the reinsurance side and also on some other contracts the reinsurance company is paying a commission to the primary insurance company to compensate for his 00:32:29.000 --> 00:32:47.000 Position cost so what you're looking at in the end is looking at the net premium each of these courtesies retain in the value chain. So the primary insurance will then retain basically net retained premium The reinsurance commissions they receive and potentially fronting fee 00:32:47.000 --> 00:33:04.000 If applicable and the reinsurance companies would retain the seeded premium excluding external acquisition costs or commissions they've paid to the primary insurance companies and if You have the same circle for the emissions of an insured project or a portfolio of 00:33:04.000 --> 00:33:12.000 Projects. The idea is really to split According to this premium split in in this approach. 00:33:12.000 --> 00:33:17.000 So that's basically the fundamental idea and then maybe go to the next slide. 00:33:17.000 --> 00:33:36.000 Typically, reinsurance companies follow the fortunes of the primary insurance and there's no direct contract relationship to the to the actual insured that has the object to ensure And the same is here the case. So for the methodology and the line of business 00:33:36.000 --> 00:33:54.000 Basically, we follow in the treaty reinturance approach everything that is in scope of the existing PCAF standard. So currently it's commercial lines and personal motor and also the construction related covers we just heard Those could also be covered. That's in scope 00:33:54.000 --> 00:34:03.000 Of measuring emissions for treaty reinsurance. I already touched on what Twitter user insurance is so skip on that one. 00:34:03.000 --> 00:34:26.000 And then a last point, which is quite important is the ability to influence in the indonesians but also a portfolio basically for a treaty reinsurer the ability to steer is not on an individual insured asset but it's router overall so he defines the conditions 00:34:26.000 --> 00:34:45.000 To which assets flow into insurance companies or individuals it's in the case of life insurance So the steering reinsurer has is really on a contractual level which means we should also try to look at emission on a contractual level or an aggregate 00:34:45.000 --> 00:35:01.000 Level and obviously being one step further down the value chain reinsurance companies have less influence on primary insurance than than the primary insurance companies had. 00:35:01.000 --> 00:35:07.000 Good. Can you go to the next slide please in terms of emissions coverage same thing. We follow the primary standard. 00:35:07.000 --> 00:35:19.000 So same that has been decided in PCAF will also apply to the respective line of business in For tree reinsurance. 00:35:19.000 --> 00:35:36.000 So for Part C, it's basically the reinsurance will consider Scope 1 and 2 emissions for commercial lines and should also consider absolute scope three emissions to the extent that certain numbers are available so it's the same measure for construction 00:35:36.000 --> 00:35:47.000 Related covers it would be what Henna just presented so we would follow that on what we basically look at in the reinsurance side. 00:35:47.000 --> 00:36:05.000 Good. We can go to the next slide to the attribution methods. I already mentioned initially that data availability is kind of an issue in In the reinsurance space to calculate the emissions. So we were discussing about having a bottom-up approach 00:36:05.000 --> 00:36:28.000 To calculate emissions but it's very first very data intense and very difficult because there's some reinsurance structures which are not easily to um translate into how much of the emissions should land on a on the Rangers balance sheet, which is why we decided for these two methods. So method A is basically 00:36:28.000 --> 00:36:34.000 The preferred method and where the industry will probably be in a couple of years. 00:36:34.000 --> 00:36:53.000 That basically decedent or the primary insurance companies that seed the business to the reinsurer will provide insurance associated emissions for a given portfolio. So we know or they let the prime insurance calculate their emissions because they also do this for their own purpose and then along 00:36:53.000 --> 00:37:00.000 Submission date for reinsurance contract negotiations insurance associated emissions will be. 00:37:00.000 --> 00:37:21.000 Handed on to the reinsurance companies and then the formula as shown would apply which is basically the ratio of the seeded written premiums which is what is going on to the to the reinsurance company, to the total gross premium the prime insurance company earns so this ratio defines 00:37:21.000 --> 00:37:30.000 How much of the insurance associated emission of this portfolio will land with the reinsurance companies. 00:37:30.000 --> 00:37:47.000 Since that will be taking a few years until such data will become more available we thought the reinsurance company should also have a a method where they can start estimating emissions without such data. 00:37:47.000 --> 00:37:55.000 And here we have different line of business approach. So depending on the line of business we have decided discuss different formulas. 00:37:55.000 --> 00:38:18.000 And for commercial lines. It's actually quite simple to calculate that What is needed is basically an economic emission intensity so emissions over revenue And based on that, multiplying the premium, we can get the emissions as in the commercial insurance standard 00:38:18.000 --> 00:38:23.000 Which is already in the first version of the PKAF standard. 00:38:23.000 --> 00:38:40.000 So then it was need a data proxy for setting an initial intensity for a given portfolio and based on this you can estimate the The insurance showed emissions for commercial lines. For personal motor it's very close to the primary 00:38:40.000 --> 00:38:51.000 Insurance standards for personal motor insurance so basically have the same formula as with the personal motor attribution factor which is fixed globally. 00:38:51.000 --> 00:38:57.000 And then you need to have a proxy for emissions of an insured vehicle within that portfolio. 00:38:57.000 --> 00:39:19.000 And there's um suggestions in the standard what data sources you can use. Maybe we have more information or less about the portfolio so you could take a national average or so to estimate that. And the session rate is basically the ratio of the seeded written premiums to the gross written premiums that is also used in method A 00:39:19.000 --> 00:39:36.000 For project related covers this still needs to be defined, but it will be very similar since these formulas are also the basis of premium over revenue, so very close to the commercial insurance standards. 00:39:36.000 --> 00:39:55.000 And in the standard do suggest proxy data some out of the pcaf database so you have industry specific emission intensities that you could use for your insurance portfolio or could even use economy wide emission intensity as proxy data. 00:39:55.000 --> 00:40:02.000 And an important point is that the premiums are always kind of excluding external acquisition costs. 00:40:02.000 --> 00:40:12.000 Meaning on a net net basis. It can go to the next slide. 00:40:12.000 --> 00:40:18.000 Good. So here's a short overview of potential proxy data for the commercial lines. 00:40:18.000 --> 00:40:27.000 Approach under method B. We have different lines of business on the left, property liability, known life and so on. 00:40:27.000 --> 00:40:47.000 And different types of insurance and what could be a good proxy. So if you have a a French, relatively large French insured active across all lines of business lines of business across the economy you could say we can just use the emission intensity 00:40:47.000 --> 00:41:00.000 For the whole economy as a proxy to start estimating If they're active in several markets, you could use a weighted average of the different markets and these emission intensity of the locations. 00:41:00.000 --> 00:41:22.000 If you have kind of a specific profile of reinsured risks in specific industries and we have some estimates about that you could use a This occupancy weighted average intensity for the insurers and so on. Then if you have specialized you know insurers that are only writing agriculture you can go to revenue based 00:41:22.000 --> 00:41:42.000 Emission intensity for agriculture sector sections are weighted average for multiple countries if it's active globally or also for the aviation sector you could go from mission intensities of marine aviation sectors from several countries or individual countries depending on the individual 00:41:42.000 --> 00:41:53.000 Different activities the primary insurance company has for seating business. Maybe we can jump to the next. 00:41:53.000 --> 00:42:12.000 One. Good. Here's a bit to pros and cons. So I think the advantages is of method a is it's easy to calculate it's an aggregate approach. The metrics are available And there's no need to redo calculations from the primary insurance company. 00:42:12.000 --> 00:42:30.000 Calculations of primary insurance are reused and reused also basically leveraged and there's consistency between the between the the calculations that is done in the primary and the reinsurance sector. 00:42:30.000 --> 00:42:48.000 The approach is agnostic of line of business so it can be really applied to all lines of business And yeah, I mentioned to pass down data along the value chain. I think it's a part of ensuring consistency but it's also 00:42:48.000 --> 00:43:00.000 Typically trying to capture emissions data at the point which is closest to the original policyholder where we get most accurate data and then try to leverage data going forward. 00:43:00.000 --> 00:43:08.000 Obviously, the cons, we depend on the primary insurance companies to provide such data. 00:43:08.000 --> 00:43:27.000 There could be restrictions on such data can be shared so there's some work needed in that area for sure And… currently insurance associated emission is not something that is widely available i think i touched on this as well. And then maybe last but not least 00:43:27.000 --> 00:43:46.000 When we use the total premium seeded and the total premium that the prime insurance company earns as a ratio to distribute emissions it can lead to understatement and overstatement of emissions depending of the structure of of portfolio. So if you have 00:43:46.000 --> 00:43:56.000 Some very carbon intense acids in there and certain session structures you can lead to over and underestimations. 00:43:56.000 --> 00:44:05.000 Of such an aggregate approach versus going down to each individual policy and trying to assign emissions individually. 00:44:05.000 --> 00:44:21.000 Maybe you can quickly go to the Last slide. So on option b on the pros and cons I think the pro is there is quite a lot of proxy data that we also suggested in the report. 00:44:21.000 --> 00:44:26.000 And then secondly, the reinsurers remain here in control on how to cash. 00:44:26.000 --> 00:44:44.000 Calculate that's for the commercial lengths And the con of this is I think most of us that work with greenhouse I guess a greenhouse gas emission data is that the data quality sometimes challenging and can be volatile when we use such data. 00:44:44.000 --> 00:44:59.000 Which also shows no this is really an estimate and using such aggregate estimate data to try to steer a portfolio in terms of emissions is not feasible. 00:44:59.000 --> 00:45:15.000 In the first stage for sure. Maybe some on option B for personal motor Here we have… that the public information is typically available. There's lots of data that can be used. 00:45:15.000 --> 00:45:38.000 Also here, insurers can also control the emission calculation methodology and um by using market information we can… avoid the mismatch of an aggate level to to an aggregation of individual emissions. 00:45:38.000 --> 00:45:47.000 And the cons… It's obviously depending on the market may not always be available to have such data. 00:45:47.000 --> 00:45:58.000 And obviously, the more details you use the more volatile such results can get if you have more assumptions in the data. 00:45:58.000 --> 00:46:10.000 You'll get more volatility based on these assumptions as well. Could maybe finish on the last slide. We found some implications and suggestions for the existing standards. 00:46:10.000 --> 00:46:24.000 One is basically that we could recommend to report emissions not only on a gross basis for primary insurance companies, so all the business they underwrite. 00:46:24.000 --> 00:46:37.000 But also on a net basis after deducting reinsurance and that will provide an accurate picture for the risk they actually retain on their balance sheet and the emissions associated to that. 00:46:37.000 --> 00:46:58.000 While for the cross reporting that would show really how emissions does a primary insurance company facilitate overall obviously you can do the same For reinsurance, if the reinsurer has another reinsurer in place you can also do that growth and net reporting and that would in addition 00:46:58.000 --> 00:47:18.000 To reporting so there will be no double counting if you look at these net figures between primary and reinsurance companies and then the second point is what I already mentioned basically the the aim to share data aggregated data on emissions along the value chain so it could be the prime insurance companies or maybe the insurance 00:47:18.000 --> 00:47:39.000 Broker if there's one involved that captures this data and provides it down the value chain to the primary insurance and reinsurance company and this would greatly facilitate the take up of insurance associated mission reporting the consistency of such reporting across companies and also the efforts needed 00:47:39.000 --> 00:47:44.000 To do searches. Excuse me, search estimations. 00:47:44.000 --> 00:47:56.000 Good. With that, I would… stop for questions and I think they're already a few questions in do you want to read them out mutiline? And I can think about the answer while you read them out. 00:47:56.000 --> 00:48:07.000 Yeah. Yeah, thank you very much for the presentation. And I was about to say that you could also see the questions if you open the Q&A. 00:48:07.000 --> 00:48:17.000 Because some of them are a bit longer But the first one asks, will reinsurers be allowed to reject data provided by the student under Method A? 00:48:17.000 --> 00:48:31.000 And choose method B instead if they are not satisfied with for example the data or the method that was used by decedent or if they don't have satisfactory information about what method or data was used. 00:48:31.000 --> 00:48:41.000 That's an interesting question. It comes about basically you know the legal implications as well of handing data down the value chain. 00:48:41.000 --> 00:49:01.000 Obviously you will need to have to do some kind of quality check to for the data, we have not decided yet whether you could use a meso to do that but in any case i mean in any case if you're able to judge the data quality on a detailed level. 00:49:01.000 --> 00:49:22.000 I think you can either make adjustments if you have that knowledge about about the data provided or you can in my view you should be able to say okay this data does not reconcile with any other data points we get and go for another data proxies that would 00:49:22.000 --> 00:49:35.000 Probably always be an option. But it's a very good point which we have to take up in the discussions in the working group. 00:49:35.000 --> 00:49:44.000 Then another person asks, what is the motivation for a reinsurer to use method A ahead of method B? 00:49:44.000 --> 00:50:09.000 I think I alluded to this a bit, right? So method A is really providing animation profile for a reinsurance treaty contract that reflects the actual emission profile of that company so it should be directly linked to the yeah to the emissions that entails and as such 00:50:09.000 --> 00:50:30.000 We're not talking about steering here, but if all regulators come and say you need to have measures to reduce your greenhouse gas emissions, particularly the EU, and quantify these emissions And I think there's no way around to use reported data by our clients in order to make decisions on 00:50:30.000 --> 00:50:52.000 How to steer a business if that should be necessary. And I think that's the message that way And the reason why method A should be the preferred method. If you look at method B, Obviously, if you use Countrywide averages for emission intensities you cannot make any steering. 00:50:52.000 --> 00:51:13.000 Decisions that's really providing you a high level indication of the emission profile of your portfolio but basically all your clients in Germany will have potentially the same emission intensity and therefore you cannot make decisions on that basis. I think that's the main point. And in the end. 00:51:13.000 --> 00:51:35.000 The results will also be more accurate for For method B, going back to the last question, provided they primary insurance companies do a diligent job at calcium calculating their insurance associated emissions. 00:51:35.000 --> 00:51:36.000 Yep. 00:51:36.000 --> 00:51:45.000 All right, great. So… The next one is a bit longer. So this person starts with saying A primary reinsurer would not include the written premiums ceded to a reinsurer In its emissions report. 00:51:45.000 --> 00:52:01.000 But only the net premiums as PCAF prescribes. That may significantly delay method A of the attribution factor And then the question, should we expect that PCAF will require primary insurers to separately report their seeded emissions? 00:52:01.000 --> 00:52:08.000 To pass down emission data and enable reassurers to report seeded emissions. 00:52:08.000 --> 00:52:25.000 Okay, thanks for that question. Another interesting one. I don't see the delay. So the intention is basically at the one point This data is provided directly by the primary insurance company. 00:52:25.000 --> 00:52:33.000 To reintroduce along low state, exposure date and so on. That's a bit further down the road. 00:52:33.000 --> 00:52:40.000 Um but Um. 00:52:40.000 --> 00:52:53.000 The written premium i mean the seated premium their insurance company knows, right? So they know this part so that should not um should be not be an issue in my view. 00:52:53.000 --> 00:53:09.000 And while they may have an estimate for the portfolio based on last year data so that i think yeah there will be challenges so the data will not all be available but i don't see why there should be a significant 00:53:09.000 --> 00:53:22.000 Delay in the attribution factor because that is known at the inception of the contract so that's something well known that you know what share. 00:53:22.000 --> 00:53:29.000 Of the primary premium you typically get. I mean, not always but generally this tends to be the case. 00:53:29.000 --> 00:53:45.000 Great. Next question, do you expect a significant difference when in two to three years reinsurers move from method b to method a and if so do you have a plan to deal with that? Will it impact your decisions to respond? 00:53:45.000 --> 00:53:47.000 Report externally. 00:53:47.000 --> 00:53:59.000 Yes, there will be significant differences. I mean, even if you use the same method and update data from external sources, you get significant differences today. 00:53:59.000 --> 00:54:17.000 We did some testing on this method so we basically took a sample of our portfolio and used the kind of the bottom up calculation method and compared it with top-down and and there is some differences in that sense and um 00:54:17.000 --> 00:54:38.000 But it is not if you have many risks in an industry the results were actually quite quite close so meaning plus minus 20% for the large markets which in my view by using an an economic intensity for a whole company versus reported data bottom up is quite okay. 00:54:38.000 --> 00:54:50.000 And yeah, and you will need to restate i mean it's the result of what you do and i'm And when we do emission calculations. 00:54:50.000 --> 00:55:10.000 Yeah the way we have not thought about how you would communicate on this but um maybe a like for like comparison could be something that you do an asif calculation for previous year data or the new data basically on bottom-up method 00:55:10.000 --> 00:55:21.000 Results as well as the top-down approach you used previously so you can kind of judge what the difference could be there. 00:55:21.000 --> 00:55:26.000 So we might have Time for one or two more. 00:55:26.000 --> 00:55:35.000 So one asks, will there be some kind of a submission standard for insurer or brokers to provide the relevant information to reinsurers? 00:55:35.000 --> 00:55:41.000 In a harmonized form and make the calculation more efficient and comparable. 00:55:41.000 --> 00:56:02.000 I'm not sure if we need the form because basically you need one figure One additional figure basically you have a property netcat treaty And we already know the premium related to that on the gross and the net basis in most cases and what you need then is the insurance associated emissions 00:56:02.000 --> 00:56:17.000 Relating to that treaty. So I think it's it's It's a very simple form. Let's put it like that you could put it put the two premium values on there, but they should be already Be known. 00:56:17.000 --> 00:56:28.000 Perfect. So I think… We don't have time for more questions, so I would please ask If there was anything else that you would like answered, you can always contact us. 00:56:28.000 --> 00:56:35.000 And send us an email to info at carbonaccounting Financials. And we'll make sure to get an answer to you. 00:56:35.000 --> 00:56:43.000 And I do want to remind you all that the public consultation is open until the 28th of February. 00:56:43.000 --> 00:56:49.000 So make sure to submit your feedback before then. And you can find all relevant information in the PCAP website. 00:56:49.000 --> 00:57:06.000 So in the website you will find a section on the public consultation This will include the documents for Part A and Part C, which you can read And you will find also a survey for each part There is also an option of an offline survey document. 00:57:06.000 --> 00:57:15.000 So in the website you'll see kind of this PDF with all of the survey questions I think that can also just help you prepare your answers for the survey. 00:57:15.000 --> 00:57:19.000 Again, the recording of this session will be on the website. 00:57:19.000 --> 00:57:28.000 And any other questions, please reach out to us. And we really hope to get some of your feedback after the session. 00:57:28.000 --> 00:57:31.000 And with that, thank you all for joining. I wish you a pleasant day. 00:57:31.000 --> 00:57:37.000 Yeah.