EIOPA consults on the supervision of the use of climate change scenarios in ORSA

Written by Adam Cadle

05/10/2020

EIOPA is consulting on the use of climate change risk scenarios in the Own Risk and Solvency Assessment (ORSA).

In EIOPA’s view, it is essential to "foster a forward-looking management of climate change-related risks by insurers, also in the long term, and to enhance supervisory convergence across Europe".

The draft opinion sets out EIOPA’s expectations to national competent authorities on how to supervise the integration of climate change scenarios by insurers in their ORSA, applying a risk-based and proportionate approach.

In particular, EIOPA said supervisors should expect insurers to 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; and a climate change risk scenario where the global temperature increase exceeds 2°C.

The opinion also provides practical guidance on the selection and implementation of scenarios.

The consultation is a follow-up to last year’s Opinion on Sustainability within Solvency II, which recommended that (re)insurers consider climate risks beyond the one-year time horizon through the system of governance, risk-management system and their ORSA.

EIOPA invites stakeholders to provide their views on the consultation paper by filling in the survey by 5 January 2021.

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