Insurance Europe has published a report supporting the integration of further sustainability risks in Solvency II.
Although requirements for insurers to integrate sustainability risks into their investment, underwriting and reserving are already a part of Solvency II, the industry acknowledges the benefit of adding some further clarifications.
It states that Europe’s insurers support the EU’s ambitious sustainability agenda and are committed to continuing to contribute and to build towards the transition to a more sustainable society, and to play their role in achieving the targets of the EU Green Deal.
Sustainability is a key element of the Solvency II review and insurers are supportive of changes that can help to clarify how sustainability risks, including climate-change risks, are appropriately integrated into the Solvency II framework, insofar as this is not already the case.
Insurance Europe states that the industry supports the Commission’s sustainability-related proposals that are risk-based, such as regular reviews and updates where necessary, of the scope and calibration of standard formula parameters pertaining to climate-related natural catastrophe risk, along with the inclusion of climate change scenario analysis in the ORSA.
EIOPA’s mandate to investigate whether a differential prudential treatment for green/brown assets, as well as assets with a social objective, is justified based on evidence of risk differentials.
The industry supports transition plans, which a very wide range of companies, including insurers, will need to set up and disclose, as currently foreseen in the cross-sectoral directives of the Directive on Corporate Sustainability Due Diligence and the Corporate Sustainability Reporting Directive.
To avoid unnecessary duplication and inconsistencies, Insurance Europe adds that there is no need to include transition plans in sector specific legislation, such as Solvency II.