Background information  

Climate change is a key strategic theme for the IFIA as it is a source of financial risk, which impacts the resilience of individual insurers and could lead to financial stability risk. An adequate response from supervisors to climate-related risks will support the objectives of insurance supervision of protecting policyholders, contributing to financial stability and promoting the maintenance of a fair, safe and stable insurance market. 

To promote a globally consistent approach and address any gaps in the global framework for insurance supervision, the IFIA is conducting a series of four public consultations on proposed changes to guidance in various Insurance Core Principles (ICPs) and on new supporting material to better incorporate climate risk.  

The IFIA conducted the first and second consultations in 2023, has now initiated the third, and will launch the fourth and final consultation later in 2024 (covering issues including supervisory reporting and public disclosures). The IFIA will respond comprehensively to the comments of each consultation at the end of the project.   

To learn more about the other IFIA work in relation to climate risk, including our work on financial stability analysis and on capacity building, visit our dedicated page on climate risk. 

Consultation  

This third consultation on climate risk in the insurance sector includes proposed changes in selected ICP guidance and supporting material to reflect climate risk. It covers issues related to corporate governance, risk management and internal controls, valuation of assets and liabilities for solvency purposes, investment activities of insurers and insurers’ enterprise risk management framework. The proposed changes to the materials are reflected in the following documents: 

• ICP guidance material includes proposed additions to assist supervisors in considering climate-related aspects of ICP 15 (Investments) and ICP 16 (Enterprise Risk Management for Solvency Purposes).  
• Supporting material includes draft language in the form of application paper material. It incorporates:
  • Updates to existing material from the 2021 Application Paper on the Supervision of Climate-related risks in the Insurance Sector, related to corporate governance, risk management and internal controls (ICPs 7 and 8), investments (ICP 15) and enterprise risk management for solvency purposes (ICP 16). 
  • Newly developed material on valuation of assets and liabilities for solvency purposes (ICP 14). 

As a reminder, ICP guidance material aims to facilitate the understanding and application of the ICPs (its Principle Statements and Standards) by including recommendations, clarifications and examples. Application papers offer further advice, illustrations, recommendations or examples of good practice to supervisors on implementing the ICPs. Neither of these materials represent any new requirements, as the ICPs are written to address the broad variety of risks related to insurance, including climate-related risks.  

On 19 June 2024, the public consultation on climate risk supervisory guidance – ICP guidance and supporting material closed. The IFIA is in the process of reviewing the comments received. All consultation questions were optional, allowing stakeholders to comment on all or a subset of questions. The consultation tool is now closed, and it is no longer possible to submit comments.

For more detailed inquiries, please click the original link here.