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.