IAIS and Sustainable Insurance Forum (SIF) published an issues paper on implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Recognizing the diversity of supervisory frameworks across jurisdictions, the paper identifies a number of areas in which supervisors can encourage strengthened disclosures through the application of existing supervisory tools. To support supervisory efforts to assess the impact of climate-related risks to the insurance sector and help resolve challenges, including around public disclosures, IAIS and SIF will further work on climate-related risks in the insurance sector during 2020; the work will be focused on topics such as enterprise risk management, corporate governance, investment, and disclosures. Additionally, IAIS published a Peer Review Process (PRP) Questionnaire related to the Insurance Core Principle (ICP) 19 on conduct of business.
In June 2018, IAIS and SIF released a joint issues paper on climate change risks to the insurance sector. As a follow-up to the 2018 issues paper and recognizing the important role of the TCFD Recommendations in establishing a framework for climate-related disclosures for the insurance sector, IAIS and SIF agreed to develop this second issues paper. This paper provides an overview of practices that supervisors have considered in the development of climate-related disclosure requirements within their markets. Considering the diversity of supervisory frameworks across jurisdictions, this paper focuses on practices that can be implemented with limited direct regulatory intervention. The paper draws on the results of a SIF survey on implementation of the TCFD recommendations and supplemental guidance, which was conducted during the first half of 2019. Case studies submitted by SIF members support the formulation of options for supervisors that are included in Annex 1.
Going forward, supervisors may seek to consider a range of broader issues stemming from increased climate risk as they may be relevant for supervisory objectives, including the following issues:
- The potential for increasing climate risk to affect insurance pricing for vulnerable consumers—Supervisors could consider how to use TCFD-aligned disclosures as a springboard to explore how insurance sector climate risk intelligence can be used to strengthen government and consumer awareness, incentivize mitigation actions, and ultimately reduce exposures.
- Implications of climate risks for long-term business model resilience—Strengthening climate risk transparency, including forward-looking scenario analysis, could illuminate the ways in which climate risks may impact insurance business model viability over the long-term.
- Interactions between micro- and macro-prudential objectives—In the case of integrated supervisory authorities, strengthening climate risk transparency may have implications for a range of institutional objectives. Integrated frameworks, linking firm-level disclosures to system-level assessments, could help strengthen understanding of the impact of climate risks on individual firms as well as the impact of the sector as a whole on climate risk resilience within the financial system and broader economy.
The IAIS and SIF recognize the value of developing further material to support supervisors in their efforts to assess climate risks, including in relation to the ICPs. The second issues paper is a step toward this objective and is intended to lay the groundwork for development of future work, such as an IAIS Application Paper.
Keywords: International, Insurance, TCFD, Sustainable Finance, ESG, Sustainable Insurance Forum, Climate Change Risk, Disclosures, IAIS
Previous ArticleECB Announces Cyber Information and Intelligence Sharing Initiative
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.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.