Questions a new claims emissions standard should address: What do we mean by claims emissions?

In the property and casualty (P&C) insurance sector, claims settlement processes represent a significant source of greenhouse gas (GHG) emissions. From repairing damaged vehicles to rebuilding homes after natural disasters, these activities generate emissions that contribute to an insurer’s overall carbon footprint. As insurers strive toward net-zero targets, understanding and managing these emissions is becoming increasingly critical.

During our recent roundtable on claims emissions accounting the need for a standardized approach was underscored. Several key questions also emerged, such as how these emissions should be defined, classified, and reported under the GHG Protocol. Depending on the perspective, they could be considered either upstream or downstream emissions within the value chain.

Definition of claims emissions

We define claims emissions as the GHG emissions that arise from repairing and replacing insured assets and liabilities. In essence, once an insurance policy is issued, there is a potential for claims emissions to occur.

This definition links claims emissions directly to the insurance product. This connection is logical since claims themselves are always tied to an insurance product — more specifically, to sold insurance policies.

Are claims emissions upstream or downstream?

Under the GHG Protocol, emissions are categorized into three scopes. Claims emissions are neither direct emissions from the insurer (scope 1) nor those associated with the energy consumed by the insurer (scope 2). Instead, they fall under scope 3 as value-chain emissions.

Scope 3 emissions are further divided into upstream and downstream categories. Upstream emissions occur before a product or service reaches the end customer, while downstream emissions occur after a product or service has been sold.

Given our definition of claims emissions, it follows that they arise after an insurance product has been sold. Therefore, they should be classified as downstream emissions.

The urgent need for a claims emissions standard

As highlighted during the roundtable discussion, there is an urgent need to develop a standardized approach to accounting for claims emissions. Such a standard would not only ensure regulatory compliance but also provide strategic benefits by fostering greater transparency across the industry.

While this blog post addresses key questions around defining claims emissions and classifying them as downstream, many other important issues remain unresolved. We plan to explore these topics in future posts.

In the meantime, we encourage all stakeholders to join the conversation and collaborate in shaping this much-needed standard. For more information on how you can contribute, please visit our website or contact us at contact@claimscarbon.com.

Image credit: Dallas Penner on Unsplash