French insurers urged to speed up response to climate change

Written by Adam Cadle

04/05/2021

French insurers have been urged to speed up their response to climate change by France’s banking regulator (ACPR).

The regulator published the results of a climate pilot exercise, “a world first”, consisting of an assessment, conducted by a supervisor, of the financial risks associated with climate change with the banking groups and insurance undertakings under its remit. In total nine banks and 15 insurers - accounting for nearly all their respective sectors – were tested on, to measure resilience to common “scenarios” like a slow response to climate change. Furthermore, it covered a 30-year period from 2020 to 2050, looking at risks from “transitioning” or moving from polluting to more climate-friendly assets and from physical risks like fires and floods.

The ACPR found that the companies’ exposures to transition risks were “rather moderate”, but the expected increase in claims and premiums for some insurance risks was particularly noticeable.There are also uncertainties over how fast climate change will unfold and data gaps, the watchdog said.

“In the light of these results, banking institutions and insurers now need to step up their efforts to combat climate change by integrating the risks associated with climate change into their financial risk assessment process,” Bank of France First Deputy Governor Denis Beau said.

The results will have no impact on how much capital the financial firms must currently hold, and there will be no specific, follow up actions.

“The aim of the exercise was.. to stimulate thought, analysis and promote a better integration of climate risks into risk management at firms,” Beau added.

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