EIOPA outlines approaches to assess the prudential treatment of insurers’ sustainable assets/activities

Written by Adam Cadle

05/12/2022

EIOPA is taking a step-by-step approach to assessing whether a dedicated prudential treatment of assets and activities associated with environmental or social objectives under Solvency II would be warranted.

The Authority published a discussion paper on the issue today outlining the intended scope, methodologies and data sources for this assessment exercise and focuses on three distinct areas of analysis:

• Assets and transition risk exposures: This first area concerns insurers’ investments and proposes ways to assess how risks stemming from the transition to a less carbon-intensive economy could potentially impact prudential risks related to stocks, bonds and real estate.
• Underwriting risk and climate change adaptation: The second area of analysis focuses on non-life insurance and examines the potential effect of climate-related adaptation measures on underwriting risk and related loss exposures from a prudential perspective.
• Social risks and objectives: The third area discusses how social risks or harm to social objectives could translate into prudential risks and assesses their corresponding prudential treatment in the requirements on governance, risk management as well as reporting and disclosure.

EIOPA is welcoming comments on the discussion paper until 5 March 2023. Stakeholders are invited to provide their feedback by responding to the questions in the online survey.

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