Transition planning for insurers

Background

Financial institutions, including insurers, are increasingly expected to align their business models with the transition to a net zero economy. This shift is not only essential for environmental sustainability but also for long-term financial resilience.

The Central Bank of Ireland (Central Bank) recognises that credible and actionable transition plans are a key tool in managing climate-related risks and supporting a sustainable financial system. These plans help insurers articulate how their operations and strategies contribute to the broader societal goal of achieving net zero emissions.

Transition planning is becoming a regulatory and strategic imperative. Insurers that fail to plan adequately may face reputational, legal, and financial risks, particularly as stakeholders demand greater transparency and accountability.

This note summarises the Central Bank’s recent publication “Planning for the Transition to Net Zero – Our Perspective”, which outlines the regulator’s expectations and provides guidance to support insurers in developing robust transition plans.

What is a Transition Plan?

A transition plan is a roadmap that shows how a company will reduce its greenhouse gas emissions over time.

The goal is to help the company move toward net zero - this means balancing the amount of emissions they produce with the amount they remove from the atmosphere.

These plans often include steps to shift to low-carbon activities, like using renewable energy or changing how products are made.

Regulators and investors are increasingly asking companies to publish clear, realistic transition plans to show how they are preparing for a greener future

The Central Bank of Ireland’s Perspective (May 2025)

The financial services sector will need to transition to net zero at a pace that is compatible with national and EU climate targets. Moreover, given the importance of the financial services sector to the wider Irish economy, the sector will both be affected by, and make an important contribution towards, the broader societal transition to net zero.

The Central Bank acknowledges that transition planning is an emerging area, however, considers it good practice for insurers to develop transition plans, even where there is no legal requirement to publicly disclose them. The Central Bank’s information note is not formal guidance but is intended to offer a clear, simplified approach to support meaningful action on transition planning.

The Central Bank outlines five core principles it considers essential for an insurer’s transition plan to be credible and effective:

1. Leadership: Clear direction from the board and strong execution and accountability by senior management are essential. Success depends on adequate resources and in-house expertise to drive the transition plan.
2. Viable actions: Identify practical steps to support and respond to the shift to a net-zero economy. These actions should be science-based and support the net-zero transition.
3. Targets: Transition plans should include clear, measurable objectives. These targets should be proportional to the insurer's size and complexity, providing a basis for progress tracking and accountability.
4. Risk management: Align climate risk management with the firm’s exposure and integrate it into the transition planning process.
5. Monitoring & review: Establish a framework to regularly review and update transition plans, ensuring alignment with the insurer’s strategy, evolving external expectations, and progress against defined goals.

Viable actions (Decarbonisation levers)

• Engagement: insurers should consider engagement with their stakeholders when developing their plans, setting science-based targets, and how the transition will be funded.
• Data: credible transition plans rely on high quality GHG emissions data across the value chain. Insurers should actively engage with closing data gaps and managing indirect emissions across their value chain.
• Investors: As asset owners and managers, insurers can drive the transition by aligning investments with climate goals, influencing and exercising stewardship to reduce emissions and avoid greenwashing.
• Financing needs: A credible transition requires scaled-up investment across the economy, with insurers playing a key role by aligning capital flows, supporting adaptation, and using sustainable finance tools to fund climate goals.