Climate-related Financial Disclosure

Because climate change has a significant impact on society and industry, we recognize that disclosing tne impact of climate change on buisiness activities is essential for the stability of society and the financial system.
The MS&AD Insurance Group endorses tne Task Force on Climate-Related Financial Disclosures (TCFD)  and promotes the disclosure of financial information.

Governance: Climate-related Internal Control

To achieve a “Resilient and Sustainable Society,” the MS&AD Insurance Group is tackling climate change mitigation and adaptation through Creating Shared Value (CSV) initiatives.
Promotion and monitoring of these initiatives is discussed by the Board of Directors, the Group Management Committee and Task-Specific Committees.
The Board of Directors discusses and determines important matters such as management strategies and capital policies including climate-related matters and supervises the execution of duties by Directors and Executive Officers.
The Group Management Committee discusses important matters such as management policies and strategies that include the recognition of climate-related issues and initiatives, and monitors the execution of tasks by Executive Officers.
Climate-related issues and progress with initiatives are reported to both the Board of Directors and the Group Management Committee after discussions primarily by the Sustainability Committee and Risk Management Committee (respectively four times annually).
The CFO, receiving reports on climate related updates and information from the Corporate Planning Department, operates the Sustainability Committee, which discusses initiatives and plans. The Chief Risk Officer, receiving reports on climate-related risks from risk management departments, operates the Risk Management Committee, which monitors risk, return, capital and the status of risk management, and discusses and coordinates important matters.


Strategy: Climate-Related Risks and Opportunities

Climate change poses risks in such areas as rapid social and economic changes resulting from the increasing scale of natural disasters and the transition to a carbon-free society.
While ensuring financial soundness and stable profits, the Group undertakes duties of insurance claims for damage caused by natural disasters such as typhoons and floods in the form of insurance payments. At the same time, we are pursuing initiatives for disaster prevention and mitigation both in Japan and overseas.
In addition, we are contributing to the realization of a resilient and sustainable society by promoting efforts to support the development of new technologies to reduce the risk of climate change and efforts to reduce the environmental impact of our business activities.

[Climate-Related Risks]
Sometimes damage from natural disasters such as typhoons becomes huge and increases the amount of insurance payouts. If the impact of climate change worsens major natural disasters, there is a risk that insurance payments will be large. The Group prepares for such payments through reinsurance, catastrophe bond arrangements and maintaining appropriate catastrophe reserves.
In fiscal 2019, the common reinsurance special contracts newly entered into by Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance worked effectively, and we were able to secure stable profits for the fiscal year.
We will continue to control the retained amount of natural catastrophe risk, considering the effects of climate change, while securing the capital necessary to maintain financial soundness.
We are also promoting reform of our business portfolio by expanding earnings in the international and life insurance businesses.
Through the geographic and business diversification of these businesses, we are working to build a more stable earnings base and increase resilience to large-scale natural disasters.
In addition, in preparation for frequent natural disasters, we are utilizing digital technology to build a system that allows customers who have suffered damage to receive insurance payouts as soon as possible. We have also started a new loss survey method using drones and AI.


In addition to the occurrence of natural disasters, the Group recognizes that climate change could have the following medium- to long-term effects.

  • Changes in weather such as little rain, drought and reduced water supply
  • Tightening environmental regulations and progress of technological innovation to tackle the advance and impact of climate change
  • Increase in litigation related to environmental disasters
  • Increases in reinsurance premiums due to frequent natural disasters and growth in the scale of such disasters
  • Increase in the incidence of heat stroke and infectious diseases due to rising temperatures
  • Changes in the industrial structure aimed at realizing a carbon-free society
  • Deterioration in investment returns in sectors affected by rising carbon prices and reduced demand for fossil fuels

While recognizing increasing risks in such areas, we are monitoring their impact on the Group’s business and utilizing them in our business strategies. We have also started dialogue with investee companies on the impact of climate-related risks on business activities.

Akibare Re 2020-1 catastrophe bond

Mitsui Sumitomo Insurance, via Singapore-domiciled special-purpose company Akibare Re Pte. Ltd. in March 2020 issued catastrophe bond Akibare Re 2020-1 (issue amount US$100 million), which will provide MSI with protection against typhoon risk and flood risk in Japan.
The frequency of large-scale natural disasters is raising uncertainty for the reinsurance market. Therefore, it has been decided to issue the bond to secure long-term stable cover by diversifying reinsurance procurement methods while reducing its net retained risk amount.


[Climate-Related Opportunities]


Based on the MS&AD Group’s Story of Value Creation, we have been promoting Creating Shared Value (CSV) initiatives under our medium-term management plan “Vision 2021” from fiscal 2018. We have positioned “contribute to climate change mitigation and adaptation” as one of our seven key CSV initiatives.

1. Identify and inform on risks
Addressing climate change is an important issue for sustainable business development, and we are analyzing the medium- to long-term risks of climate change. The Group also provides risk consulting services related to climate change and support for the formulation of strategy and information disclosure.

  • Free provision of the website “Prediction Map Showing Changes in Flood Frequencies”
  • “Climate change risk analysis service” that assesses and analyzes the physical risks related to climate change and the business risks associated with the transition to a decarbonized society. In June 2020, we began offering, in partnership with Jupiter Intelligence of the United States, the “Climate Change Impact Assessment Service for TCFD,” a global climate change impact assessment service.
  • A service for the analysis and evaluation of future water-related risks (e.g., water depletion, water pollution, floods)


2. Prevent risks from occurring/Minimize the impact
Physical risks such as extreme weather and natural disasters will increase as the average global temperature rises. We are striving to provide information and risk consulting services to prevent or minimize losses when these risks become reality.

  • We offer a “Weather Information Alert Service” that provides weather information relating to customers’ specified business locations and sends out alert e-mail messages.
  • Our smartphone app “Suma-Ho Disaster Navigator” helps users to remain safe and secure during large-scale natural disasters.
  • Initiatives to use RisTech for disaster prevention/mitigation
  • Launch of a real-time loss prediction website “,” which predicts the number of buildings damaged due to typhoons, heavy rains and earthquakes


3. Reduce the economic burden when risks materialize
It is the mission of insurance companies to promptly cover customers’ financial losses in the event of a natural disaster and to help them restore their lives and resume their businesses. To fulfill that mission, we are working to provide products that meet the needs of our customers.

  • We have been promoting flood and earthquake preparedness activities to explain to customers the risks of water disasters and earthquakes and prepare them for natural disasters by encouraging them to reappraise the risks they face.
  • We sell weather derivatives to lessen the financial losses due to unseasonable weather.
  • We are one of the underwriters for natural disaster risk under a natural disaster insurance facility established to provide reconstruction funds promptly to affected countries/regions in cases when natural disasters of a certain scale occur in Pacific Island and Caribbean countries.
  • We provide insurance for renewable energy including mega-solar and small-scale wind power projects.
  • We provide accident prevention and maintenance support for efficient power generation by diagnosing the business and maintenance risks of renewable energy.

[Scenario Analysis : Strategic resilience in diverse scenarios]
The TCFD recommends scenario analysis, which analyzes the impact of climate change on businesses based on future scenarios.
Our initiatives are as follows.

  • We have been participating in a project led by the United Nations Environment Program Finance Initiative (UNEP FI), with more than 20 signatory insurance companies of the Principles for Sustainable Insurance (PSI), from its inception. The project is working on the development of scenario analysis methods for insurers. With reference to the latest climate science and looking at future time frames such as 2030 and 2050, development of analysis methods for assessing the impacts of typhoon physical risks are discussed.
  • We have also begun calculating our own carbon footprint and carrying out scenario analyses of our asset management portfolio.

Risk Management : Appropriate management of identified risks (ERM cycle for climate-related risks)

The MS&AD Insurance Group has established the MS&AD Insurance Group Risk Management Basic Policy. The policy identifies the principal types of risk with an impact on the Group’s business. Based on the ERM cycle, those risks are managed in light of capital and balance with profitability.
In addition, climate-related risks are reported to and discussed at the Risk Management Committee and then reported to the Board of Directors and the Group Management Committee.

1. Managing natural-disaster-related risks
With respect to risk relating to windstorms and floods in Japan and the United States, we set the upper limit (risk limit) of the amount for Group companies based on the losses that can occur with a probability of once in 200 years. In addition to risk measurement of natural disasters and stress tests of large-scale natural disasters, we are undertaking studies on methods of incorporating the effects of climate change into stress tests and methods of quantifying the effects of climate change.

Stress tests

When various stress events occur, we conduct stress tests to confirm the effects of various stress events on capital and risk amounts. In the stress tests, to complement the limitations of risk measurement by statistical methods, we select scenarios based on information about the Group’s portfolio and risk characteristics and on significant changes in the external environment. In this way, we identify the vulnerability of the portfolio and confirm the necessity and urgency of countermeasures.

2. Controlling the retained amount of natural catastrophe risk
We assess the risk amount using statistical methods by region and disaster. Based on this assessment, we maintain decent underwriting, arrange reinsurance, issue catastrophe bonds and provide catastrophe reserve. Through these measures, we are working to improve the financial soundness of the entire Group and to reduce the variable risks of periodic profit/loss.

●Lower natural catastrophe retention on a Group-wide basis

  • Lower natural catastrophe retention including that for windstorms and floods in the United States
  • Strengthen management of the profitability of the reinsurance business


●Reduce the risk of profit fluctuations

In addition to respective reinsurance coverage of Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance for domestic natural catastrophes, we arrange for joint reinsurance treaty coverage shared by the two companies that covers annual aggregate losses. By such means, we are reducing the risk of profit fluctuations. This functioned effectively with respect to the occurrence of domestic natural disasters in fiscal 2019, and we have organized the same level of reinsurance in fiscal 2020.
We are promoting dialogue with investee companies to promote climate-related information disclosure. We are also considering dialogue methods for sustainability issues including climate-related issues.

Metrics and Targets : Establishing metrics and targets for managing risk

As a monitoring indicator for our contribution to climate change mitigation and adaptation, the Group has prioritized Creating shared value (CSV initiatives). The results of these approaches are being reflected in the performance-based compensation of the company’s internal directors.

1. Creating shared value (CSV initiatives) metrics
We have set monitoring indicators for development and improvement of products related to our contribution to climate change mitigation and adaptation. We calculate the economic impact on the Company and the impact on society from our CSV initiatives. The results of these approaches are being reflected in the performance-based compensation of the company’s internal directors.

2. Metrics and targets for initiatives to reduce the environmental burden through business activities
The Group is working to reduce the environmental impact of its business activities by using reduction rates for total energy consumption and for CO2 emissions as monitoring indicators.
Our aim is to reduce CO2 emissions by 30% by 2020 and by 70% by 2050.
In fiscal 2019, the reduction rate for total energy consumption was 33.4% and the reduction rate for CO2 emissions was 20.7% (versus the base year of fiscal 2009).
We are striving to reduce total paper consumption and contribute to the sustainable use of natural resources.
In addition, we have started measuring the carbon footprint (CO2 equivalent greenhouse gas emissions from business activities) of investee companies and have begun studying the utilization of this information.