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Insurers warn EIOPA against prescriptiveness in ORSA climate risk requirements

Insurance Europe has today published its response to a consultation conducted by the European Insurance and Occupational Pensions Authority (EIOPA) on its draft opinion on the use of climate change scenarios in an insurer’s own risk & solvency assessment (ORSA).

While insurers agree that it is important to foster a forward-looking management of climate change risk, as well as other risks, climate change scenario analysis should only be included in an insurer’s ORSA if it actually faces material climate risks.

The decision to perform forward looking analyses on climate change risks in the ORSA should remain at the discretion of the insurer. Among other things, this will enable insurers to take into account their individual risk situations and any geographical specificities related to climate change risks.

Insurance Europe also warned against additional prescriptiveness in ORSA processes because of uncertainties and limitations connected to climate risk scenarios, as well as differences in the materiality of climate risks across insurers and time horizons.

Furthermore, it noted that the ORSA is not necessarily the most appropriate tool to achieve forward-looking management of climate change risk via standardised scenarios, and that other tools may be more appropriate for an insurer to manage its risks.

Published 6 January 2021