The European Commission adopted a package of measures on sustainable finance, including amending Delegated Acts with respect to Solvency II as regards the integration of sustainability risks in the governance of insurance and reinsurance undertakings.
The secretariat of Insurance Europe has assessed the documents in line with positions agreed during the EC consultation on this topic. Based on the secretariat’s analysis, the drafts are generally aligned with EIOPA’s final advice and do not contain major changes with respect to the EC draft amendments, with the exception of the definition of sustainability preferences.
Insurance Europe has actively engaged with the EC, both directly and as part of a larger financial services associations coalition, to express concerns about the definition of “sustainability preferences”, which entails additional requirements for sustainable products, inconsistent with the SFDR (see advocacy material here). Unfortunately, it appears that the EC has not fully aligned the definition with the SFDR. While the secretariat notes some improvements, eg in terms of coherence across EU legislation (SFDR and Taxonomy Regulation), the definition of ESG preferences might still exclude some Article 8 products under the SFDR.
Overview of the amendments to Solvency II Delegated Acts
The amendments to the Solvency II DAs include sustainability risks (SR) in:
- Article 260 about risk management areas (underwriting reserving, investment risk management and related policies)
- Article 269 about the risk management function (including consideration of SR in the overall solvency needs as per Article 262)
- Article 272 about the actuarial function
- Article 275 about consistency of remuneration policy with SR integration in the risk management system
- Article 275 about the prudent person principle, including taking into account:
- SR in the identification, measurement, monitoring and management and assessment of risks from investments
- long-term impacts on sustainability factors and, where relevant, ESG preferences