EIOPA published a discussion paper that highlights challenges associated with the current non-life underwriting practices and options to ensure the availability and affordability of insurance products, in the context of climate change. The discussion paper is built on work stemming from the 2019 Opinion on sustainability within Solvency II and is part of the overall sustainable finance agenda of EIOPA. The regulator is inviting comments on the discussion paper until February 26, 2021. EIOPA will consider the feedback received and finalize its report in the Spring of 2021.
The discussion paper aims at highlighting the challenges associated with short-term non-life contracts and annual re-pricing using past natural catastrophes events and the impact of climate change on the premium, affordability, and protection gap. The discussion paper also identifies how insurers could address the protection gap issues in the context of climate change and contribute to climate change mitigation and adaptation. EIOPA has, therefore, introduced the concept of Impact Underwriting. The discussion paper explains that insurers and reinsurers can contribute to climate adaptation and mitigation by incentivizing policyholders to mitigate insured risks via risk-based pricing and contractual terms and by considering, in their underwriting strategy, measures that contribute to climate change adaptation or mitigation. The paper also presents a number of concrete options to ensure availability and affordability of insurance in light of climate change, with the Annex providing a number of case studies chosen by the insurance associations.
Comment Due Date: February 26, 2021
Keywords: Europe, EU, Insurance, Climate Change Risk, Non-Life Underwriting, Sustainable Finance, Solvency II, Protection Gap, ESG, EIOPA
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