EIOPA chairman tells investors to ‘act responsibly’ over climate change

Written by Michael Griffiths

19/11/2019

Insurers and pension funds have a powerful role in mitigating the impact of climate change and must ‘act responsibly,’ according to EIOPA chairman, Gabriel Bernardino.

Speaking at EIOPA’s ninth annual conference in Frankfurt, Bernardino suggested the industry ‘can do plenty’ in the area of climate change, in a way that is aligned with good risk management practices and the interest of clients.

Bernardino indicated these are real risks, and not just to the stability of insurers and pension funds business models. The EIOPA chairman also highlighted that in the last World Economic Forum Global Risks Report, from the top five biggest risks that are confronting society, four are environmental risks.

Addressing the audience, Bernardino said: “As large investors, you are well placed to incentivise and engage with business to act responsibly and ensure long-term value creation, playing therefore an important role in the gradual transition to a more sustainable and resilient economy.

“Along with other institutional investors, you can play a stewardship role in contributing to climate change adaptation and mitigation.

“This means you must consider the impact of your investment behaviour on the environment. To increase resilience to climate change, insurers can also consider the impact of underwriting practices on the environment.”

Bernardino pinpointed risk mitigation and loss prevention as areas to make a difference – suggesting that the development of new insurance products, adjustments in the design and pricing of products, as well as engagement with public authorities, should all be part of insurers’ stewardship activity.

The EIOPA chairman also welcomed the leadership of several EU insurance groups and pension funds, but said that more needs to be done to ensure that behavioural change becomes a reality – citing that climate change brings increased uncertainty about the frequency and severity of natural catastrophes.

“We must act now, and we must act together,” Bernardino added. “Sound and transparent risk management mechanisms can be built up using insurance, reinsurance, capital markets and ultimately the State to mitigate the economic impact of natural catastrophes.

“We have to better understand the underlying causes of the protection gap across Europe. A first step would be to build a European risk dashboard on natural catastrophes, to better inform political decisions on the measures to put in place – at national and European level.”

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