PRA releases updated expectations for insurers on managing climate-related risks

Written by Adam Cadle

03/12/2025

The PRA has today released updated expectations for insurers and banks on managing climate-related risks.

The update expands on the original expectations brought in via the SS 3/19 and are more extensive in how insurers and banks should manage climate-related risks.

Particularly, the regulator has clarified the approaches firms should take in identifying and assessing the materiality of climate-related risks. Expectations on climate scenario analysis is expanded to increase the governance around scenario analysis exercises and align them for decision-making and other use-cases. Additionally, the update makes it clear that boards are responsible for reviewing and agreeing material climate-related risks and ensuring appropriate risks management mechanisms are applied to them.

Starting immediately, firms will have six months to prepare a gap assessment against the updated expectations, and a credible and ambitious remediation plan to address any gaps.

Contrary to the consultation paper released in April 2025, firms will no longer need to quantify their data limitations but rather seek to understand them. The PRA has clarified that firms may choose to use reverse stress testing or scenario-based sensitivity analysis to understand their vulnerability to severe climate-related events.

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