Where should claims emissions be reported? Insights from insurers’ first-ever CSRD reports
In our previous article, we explored how leading Nordic and European insurers are beginning to disclose claims emissions under the Corporate Sustainability Reporting Directive (CSRD) – and how their methods vary. One key difference lies in how insurers categorize these emissions: under Scope 3 Category 1 (“Purchased Goods and Services”) or Scope 3 Category 11 (“Use of Sold Products”).
While most insurers lean toward Category 11, clarity and consistency are still lacking. This article explains why Category 11 is the more appropriate classification for claims emissions and what’s at stake if this is misunderstood.
Why Scope 3 Category 11 makes more sense
Claims emissions are downstream, not upstream
Under the GHG Protocol, Scope 3 emissions are split into upstream (Categories 1–8) and downstream (Categories 9–15). Since claims occur after an insurance product (policy) is sold and a loss happens, they are downstream by definition.
Category 11, which covers emissions from the use of sold products, is therefore a logical fit. In contrast, Category 1 covers emissions from goods and services needed to deliver a product. In motor insurance, for example, spare parts aren't required until after a claim, highlighting the downstream nature of claims emissions.
Category 1 misses the full picture
Category 1 reporting usually covers only emissions from directly procured repair services, like fixing a policyholder’s car or home. It often excludes two major emission sources:
Cash settlements, where customers are paid instead of a repair being arranged.
Third-party liability (TPL) claims, where the insured is liable for damage to others’ property.
These two sources can represent up to half of an insurer’s annual claims. Category 11 offers a broader framework that captures these emissions.
Illustration of the scope of an insurance claim
Aligning emissions with financial flows: the Follow-the-Money Principle
Treating claims emissions as tied to sold insurance products aligns carbon accounting with financial reporting and the GHG Protocol. The guiding principle is simple: Follow the Money. Only emissions from insurer-funded activities should be reported. This implies:
Excluding deductibles and VAT.
Including cash settlements, assuming payouts are used to address the damage. Assuming that the insurance is fit for purpose.
Excluding administrative expenses, such as claims handling, since these costs are recorded separately from claims in financial reports
All future emissions of the sold product should be reported. For insurance, this means incurred claims, in line with annual financial reporting. This mirrors how car manufacturers report all future emissions from the use of a sold car in the year it’s sold.
The data gap challenge
Despite the strong case for Category 11, insurers face a major hurdle: lack of reliable activity data for cash settlements and TPL claims.
For cash settlements, insurers often don’t know how payouts are spent – whether on repairs, replacements, or unrelated uses.
For TPL claims, data is often incomplete since affected assets aren’t directly insured by the reporting company. In many markets, TPL payments go to third-party insurers, complicating data access due to limited inter-company data sharing.
This lack of transparency hinders accurate emissions quantification, even among committed insurers.
Call to action
Claims emissions are clearly material, and how they’re categorized matters. While practice increasingly favors Scope 3 Category 11, formal guidance is urgently needed. Standards must clarify how to report claims emissions, especially for cash settlements and third-party liability, ensuring consistency across the industry.
The follow-the-money principle should anchor this standard – insurers should account only for emissions they financially cover.
Going forward, the insurance industry must align on a unified standard for claims emissions. Beyond compliance, this represents a strategic opportunity to cut costs, enhance pricing competitiveness, and support the circular economy.
