EIOPA Consults on Non-Life Underwriting and Pricing for Climate Risk
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.
Related Links
Comment Due Date: February 26, 2021
Keywords: Europe, EU, Insurance, Climate Change Risk, Non-Life Underwriting, Sustainable Finance, Solvency II, Protection Gap, ESG, EIOPA
Featured Experts
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
FINMA Revises Circular on Liquidity Risks for BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
