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
Previous ArticleEC Welcomes Agreement on Changes to Securitization Rules in EU
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.