Featured Product

    PRA Responds to Insurers on Framework for Assessing Climate Impact

    November 16, 2020

    PRA outlined its response to the industry feedback received on the framework for assessing the financial impact of physical climate change; the framework was published in May 2019 as a practitioner’s aide for the general insurance sector and was written by a cross-industry working group. The response, which is intended for the general insurance industry, summarizes the feedback received and the areas where further development is recommended. The feedback identified the a need for guidance to help assess the current model calibrations and whether these accurately represent climate change to date. In addition, the feedback highlighted the value in having a more streamlined expert judgment method for use when assessing impact from physical climate change and recognized that the impact from physical climate change includes opportunities as well as risks.

    PRA considered the feedback and reflected on how to address it within the context of the current and future climate workstreams. As a result of this feedback, the following areas have been recognized as deserving prioritization for further development: 

    • Assessing each hydro-meteorological region-peril in detail and commenting on their future climate projection characteristics, while acknowledging that it may not be possible to always find an academic consensus for such projection characteristics. To this end, BoE is actively working to promote the latest scientific developments in a format that can be more easily consumed by central banks, supervisors, and the broader financial sector as part of its involvement in the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). 
    • Assessing how current catastrophe model calibrations allow for climate change that has crystallized to date. To this end, PRA will explore that aspect further within the definition of the physical climate variables issued as part of the 2021 Climate Biennial Exploratory Scenario that published in December 2019. 
    • Assessing how the insurance industry’s experience on quantifying physical climate change risk on the liability side of the balance sheet could be used to develop a similar framework for assessing the risk on the asset and investment side of the balance sheet. To this end, the Climate Financial Risk Forum (CFRF) guide (published in June 2020) includes sections that discuss how the data, tools, and processes used by general insurers can assist other aspects of financial institutions’ climate risk management.

    PRA will continue to engage with insurance firms on their progress with embedding the supervisory expectations as set out in the supervisory statement SS3/19 on enhancing bank and insurer approaches to managing the financial risks arising from climate change and the July 2020 letter of Sam Woods, which provided thematic feedback to all regulated firms on the PRA review of firms' SS3/19 plans and clarifications of expectations. In the future, PRA will also consider whether a follow-on report to "A framework for assessing financial impacts of physical climate change: A practitioner’s aide for the general insurance sector" is required to deepen, broaden, or updates its content. Decisions in this regard will be driven by observations of progress across industry (for example, through firms’ progress against SS3/19 expectations) and results from other climate exercises (for example, the 2021 Climate Biennial Exploratory Scenario).

     

    Related Links

    Keywords: Europe, UK, Insurance, Climate Change Risk, ESG, CBES, CFRF Guide, Catastrophe Risk, SS3/19, PRA

    Related Articles
    News

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153