The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
Application guidance on climate change. The application guidance provides a detailed and practical basis on how to implement sustainable finance ambitions in practice. It gives insights into where undertakings have the possibility to address climate change risks in ORSA and provides examples using mock non-life and life companies to help undertakings design the steps for the materiality assessment and run climate change scenarios. The concrete case studies for materiality assessment of climate change scenarios included in the guidance can help lower implementation costs for insurance undertakings, in particular small and mid-sized ones, taking into account the size, nature and complexity of climate change risk exposures. The undertakings should not restrict themselves to the aspects covered in this application guidance, for example, due to specific portfolios, undertakings might want to explore other alternatives to look at climate change risks. In addition, there might be other tools and data available to perform the different analyses shown in this application guidance. EIOPA published this guidance following a public consultation on the topic as well as a pilot exercise in which stakeholders were invited to participate. Along with the guidance, EIOPA also published the feedback statement on the comments received on the consultation conducted on the application guidance.
Risk Dashboard. The dashboard assess risks in the insurance sector in the European Union and is based on the Solvency II data from the first quarter of 2022. The results show that insurers’ exposures to macro, market and digitalization risks are currently the main concern for the insurance sector. The other risk categories, such as insurance as well as profitability and solvency risks stay at medium levels. Climate risks remain at medium level. Insurers slightly increased the share of green bonds in their assets portfolio, while their ratio of investments in green bonds of the entire green bond universe slightly decreased. The y-o-y growth of green bonds in insurers’ portfolios has slightly increased, while the growth of green bonds outstanding has decreased. Digitalization and cyber risks are at a high level. The materiality of these risks for insurance as assessed by supervisors increased given the resurge of cyber security issues and concerns of a hybrid geopolitical conflict.
- Press Release on Application Guidance
- Application Guidance and Feedback Statement
- Press Release on Risk Dashboard
- Risk Dashboard
Keywords: Europe, EU, Insurance, Reinsurance, ORSA, Climate Change Risk, ESG, Risk Dashboard, Solvency II, EIOPA
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.
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