Questions & Answers
What is the scope of own operations for an insurance company under ESRS? Is it the same as under Solvency II, i.e. do the ESRS standards relate only to insurers’ non-life insurance activities (fire, health, damage to vehicles, third part liability, assistance, legal expenses etc.), or also to investment activities? How should the sustainability report address Insurance with profit participation?
- Insurance companies
- financial Institutions
- own operations
- investment activities
- reporting boundary
Background
Articles 19a (3) and 29a (3) of the Accounting Directive (Directive 2013/34/EU) require that reported information relates to the undertaking’s own operations and its upstream and downstream value chain.
ESRS do not define an undertaking’s ‘own operations.’
ESRS paragraph 62 states that: ‘The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU.’
ESRS paragraph 63 states that: ‘The information about the reporting undertaking provided in the sustainability statement shall be extended to include information on the material impacts, risks and opportunities connected with the undertaking through its direct and indirect business relationships in the upstream and/or downstream value chain (“value chain information”). In extending the information about the reporting undertaking, the undertaking shall include material impacts, risks and opportunities connected with its upstream and downstream value chain:
(a) following the outcome of its due diligence process and of its materiality assessment; and
(b) in accordance with any specific requirements related to the value chain in other ESRS.’
Answer
ESRS 1 paragraph 62 clarifies that the sustainability statement shall be prepared for the same reporting undertaking as the financial statements. Therefore, the scope of own operations for an insurance company is guided by the financial reporting requirements, which reflect the business model, and is not necessarily the same as under Solvency II. See also IG 2 Value Chain chapter 2.3).
Following the definition of business relationship in Annex 2 of the ESRS Delegated Act, the investments (including those related to insurances with profit participation) fall under the scope of an undertaking’s business relationships. Therefore, investments are considered part of the value chain and are subject to consideration in the materiality assessment of impacts, risks and opportunities as established in ESRS 1 paragraph 63. Also refer to Implementation Guidance EFRAG IG 2 Value Chain FAQ 2. When the undertaking has identified material impacts, risks or opportunities that are connected to an investment business relationship, it must disclose them (ESRS 1 chapter 5 Value chain).
Regarding investment activities, the sector-agnostic ESRS do not provide Disclosure Requirements concerning specific metrics apart from GHG Scope 3. For GHG Scope 3, Category 15 (Investments) is to be provided, if it is determined to be a significant category in accordance with ESRS E1 paragraphs 44 (c), AR 39 (a), AR 46 and AR 48.
EFRAG expects to add more guidance on these aspects in the forthcoming sector ESRS.
Relations
Paragraph | Content |
|---|---|
The information about the reporting undertaking provided in the sustainability statement shall be extended to include information on the material impacts, risks and opportunities connected with the undertaking through its direct and indirect business relationships in the upstream and/or downstream value chain (“value chain information”). In extending the information about the reporting undertaking, the undertaking shall include material impacts, risks and opportunities connected with its upstream and downstream value chain: | |
The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. | |
The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. | |
The information about the reporting undertaking provided in the sustainability statement shall be extended to include information on the material impacts, risks and opportunities connected with the undertaking through its direct and indirect business relationships in the upstream and/or downstream value chain (“value chain information”). In extending the information about the reporting undertaking, the undertaking shall include material impacts, risks and opportunities connected with its upstream and downstream value chain: | |
The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. | |
The information about the reporting undertaking provided in the sustainability statement shall be extended to include information on the material impacts, risks and opportunities connected with the undertaking through its direct and indirect business relationships in the upstream and/or downstream value chain (“value chain information”). In extending the information about the reporting undertaking, the undertaking shall include material impacts, risks and opportunities connected with its upstream and downstream value chain: |