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

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697