EIOPA pledges support to insurance industry in tackling climate change

Written by Natalie Tuck

04/11/2021

The European Insurance and Occupational Pensions Authority (EIOPA) has pledged its support to the insurance and pensions industry in tackling climate change.

In light of the COP26 climate conference taking place in Glasgow this week, EIOPA has highlighted its commitments to tackling climate change. For example, in 2022 EIOPA will finalise the first European-wide dashboard on the natural catastrophe insurance protection gap.

The dashboard will raise awareness on the role of insurance against climate-related perils and inform policy measures and private sector initiatives to secure the future availability and affordability of insurance coverage.

The regulator believes that insurers and pension funds have a “unique opportunity” to address climate change-related challenges, as long-term investors and society’s risk managers.

EIOPA expects the insurance and pensions industry to assess climate-related risks, for example as part of insurers’ own risk and solvency assessment (ORSA) and undertakings will need to disclose how their activities contribute to the transition to an environmentally sustainable economy.

To protect consumers and safeguard financial stability, EIOPA’s analysis of climate-related risks will strengthen the sectors’ stewardship role for sustainable investments and promote risk-based insurance solutions for climate change adaptation and mitigation.

EIOPA has already taken a number of initiatives since 2018, including scenario and sensitivity analyses, the elaboration of disclosure requirements, and analysis on the insurability of climate change-related risks. Sustainable finance remains a strategic area of activity for EIOPA.

It is also expanding its work on the integration of environmental, social and governance (ESG) risks in the prudential framework of insurers and pension funds, consolidating the macro and micro-prudential risk assessment of ESG risks, promoting sustainability disclosures and sustainable conduct of business framework, supporting the supervision of sustainability risks and supervisory convergence in the European Union, addressing protection gaps and, promoting EIOPA as a hub for open-source modelling and data.

In addition, as a member of the Network for Greening the Financial System (NGFS), the Sustainable Insurance Forum (SIF) and the International Association of Insurance Supervisors (IAIS), EIOPA cooperates with European and international supervisory and standard-setting bodies to establish convergent supervisory practices for climate change-related sustainability goals in the financial services sector.

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