Insurance Europe has today published its response to a consultation by the European Insurance and Occupational Pensions Authority (EIOPA) on its discussion paper on a potential methodology for the inclusion of climate change in the Solvency II natural catastrophe standard formula. The EIOPA paper discusses how the standard formula’s natural catastrophe modules could be updated to reflect the latest climate change developments.
Insurance Europe considers EIOPA’s proposal to reassess the parameters on a regular basis – ie every three to five years – to be the most appropriate approach. This will also capture any exposure, vulnerability and model changes, which are also important considerations during any recalibration.
Insurance Europe pointed out that, if the reassessment demonstrates a need for a recalibration of a particular parameter or set of parameters, this should be done via a standardised, transparent process that is comprehensible and clearly documented. Materiality will be an important aspect of the reassessment exercise and EIOPA should therefore clearly define materiality in this context and apply it consistently.