Guidance for (Re)insurance Undertakings on Climate Change Risk

This Consultation Paper is amongst a number of recent publications relating to climate change, including the Central Bank’s letter setting out its supervisory expectations in relation to climate and other ESG issues from November 2021, and EIOPA’s recent application guidance on climate change materiality assessments and climate change scenarios in the ORSA. 

This reflects a continued sharpening focus on this area with the CP highlighting the increasing frequency and severity of weather-related events already having an impact on the insurance sector globally and reiterating that the time for action is now.

The climate crisis and associated climate risk considerations are complex requiring more dynamic and longer-term risk assessments. As a result, standardised approaches, established models or past data are not readily available.

Understanding the potential financial implications of climate change will require close cooperation across several disciplines, the use of expert judgement and a patchwork of different models and datasets.

Notwithstanding the complexities involved the Central Bank expects to see a step change in how (re)insurers are responding to climate change risks. The guidance is intended to clarify the Central Bank’s expectation on how (re)insurers assess climate change risk for their business. The guidance applies to authorised insurers and (re)insurers including captive (re)insurers and third country branches. 

Our Insurance sector experts and our Sustainable Futures team have prepared a short summary of the guidance and what insurers should do next. Download the report to learn more.