Featured Product

    EIOPA Sets Out Expectations on Use of Climate Risk Scenarios in ORSA

    EIOPA published an opinion to set out its expectations on the supervision of the integration of climate change risk scenarios by insurers in their Own Risk and Solvency Assessment (ORSA). The opinion, which is addressed to national supervisory authorities, states that EIOPA will start monitoring the application of this opinion by the competent authorities two years after its publication. National supervisory authorities should expect insurers to integrate climate change risks in their system of governance, risk-management system, and ORSA. In the ORSA, insurers should do an assessment to identify material climate change risk exposures and subject the material exposures to a risk assessment.

    The insurance and reinsurance industry will be impacted by climate change-related physical and transition risks. However, only a minority of insurers assess climate change risks in the ORSA using scenario analysis, usually limited to a short-term time horizon. Therefore, EIOPA considers it essential to foster a forward-looking management of these risks to ensure the long-term solvency and viability of the industry. EIOPA points out that climate change risks should be assessed not only in the short term but also in the long term using scenario analysis to inform the strategic planning and business strategy. Insurers should subject material climate change risks to at least two long-term climate scenarios, where appropriate:

    • a climate change risk scenario where the global temperature increase remains below 2°C, preferably no more than 1.5°C, in line with the EU commitments
    • a climate change risk scenario where the global temperature increase exceeds 2°C

    Insurers are expected to evolve the sophistication of the scenario analyses, taking into account the size, nature, and complexity of their climate change risk exposures. The opinion provides practical guidance on how to select and use climate change scenarios. EIOPA expects national supervisors to collect qualitative and quantitative data to perform a supervisory review of the analysis of short- and long-term climate change risks in the ORSA. Instruments for data collection should be the regular supervisory reporting, most notably the ORSA supervisory report. The opinion follows a risk-based and proportionate approach, recognizing that the approaches to scenario analysis of climate change risk need to evolve over time, as new methodologies become available and undertakings gain experience. Depending on the regulatory developments and the methodological advancements of climate change risk (scenario) analysis, EIOPA may further develop the supervisory expectations put forward in this opinion. EIOPA delivered this opinion on the basis of Solvency II Directive (2009/138/EC), which requires undertakings to consider in their system of governance, risk-management system, and own risk and solvency assessment (ORSA) all risks they face in the short- and long term and to which they are or could be exposed, also when these risks are not (fully) included in the calculation of the Solvency Capital Requirement.

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, ORSA, Climate Change Risk, Opinion, Reporting, Scenario Analysis, SCR, Stress Testing, EIOPA

    Featured Experts
    Related Articles
    News

    EC Regulation Sets Out Standards for Reporting and Disclosure of MREL

    EC published the Implementing Regulation 2021/763 that lays down implementing technical standards for supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL).

    May 12, 2021 WebPage Regulatory News
    News

    APRA Decides to Standardize Submission Date for Quarterly Reporting

    APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.

    May 11, 2021 WebPage Regulatory News
    News

    ECB Working Group Publishes Recommendations on EURIBOR Fallbacks

    The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).

    May 11, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Supporting Documentation for Reporting by Banks

    Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.

    May 11, 2021 WebPage Regulatory News
    News

    EBA Publishes Phase 1 of Reporting Framework 3.1

    EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).

    May 10, 2021 WebPage Regulatory News
    News

    APRA to Finalize Capital Adequacy Standard Revisions by January 2022

    Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA

    May 10, 2021 WebPage Regulatory News
    News

    ESMA Issues Guidelines on Outsourcing to Cloud Service Providers

    ESMA published the final guidelines on outsourcing to cloud service providers.

    May 10, 2021 WebPage Regulatory News
    News

    EBA Publishes Data on Deposit Guarantee Schemes

    EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.

    May 10, 2021 WebPage Regulatory News
    News

    OSFI Sets Out Plan for Future Guidance on Managing Technology Risk

    OSFI has set out the schedule for release of draft guidance on the management of technology risks by federally regulated financial institutions and private pension plans.

    May 10, 2021 WebPage Regulatory News
    News

    MAS Updates Housing Loan Rules, Proposes Corporate Governance Guidance

    MAS updated rules for new housing loans by banks and finance companies.

    May 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6964