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

    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