Solvency II Divergence Hub

This Hub brings together recent developments, insights and webinars from our Corporate Insurance lawyers to help you keep track of the proposed changes to Solvency UK and Solvency II as they progress through the respective legislative and regulatory processes.

-->

Climate and sustainability risk

Climate and sustainability risks [EU]

The European Commission’s proposals are:

A new Article 45a (Climate change scenario analysis) requires insurers to identify any material exposure to climate change risks and, where relevant, to assess the impact of long-term climate change scenarios on their business.  Insurers classified as low-risk profile undertakings are exempted from scenario analyses.

A new Article 304a (Reviews as regards sustainability risk) gives EIOPA two mandates as regards sustainability risks. EIOPA is mandated to explore by 2023 a dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental and/or social objectives and to review regularly the scope and the calibration of parameters of the standard formula pertaining to natural catastrophe risk.

Recent developments:

On 5 December 2022, pursuant to the mandate proposed by the new Article 304a, EIOPA published a Discussion Paper on the prudential treatment of sustainability risks.  The paper sets out the intended scope, methodologies and data sources for EIOPA’s assessment of whether a dedicated prudential treatment of assets and activities associated with environmental or social objectives under Solvency II Directive would be warranted.  The deadline for comments is 5 March 2023.

Key contacts

Tim Goggin

Partner

London

Kirsten Barber

Senior Knowledge Lawyer

London