EIOPA launched a consultation on a draft supervisory Opinion on the use of climate change risk scenarios in the Own Risk and Solvency Assessment (ORSA), with deadline 5 January 2021.
The consultation is a follow-up to last year’s EIOPA Opinion on sustainability within Solvency II, which recommended that (re)insurers consider climate risks beyond the one-year time horizon through the system of governance, risk-management system and their ORSA.
In EIOPA’s view, it is essential to foster a forward-looking management of climate change-related risks by insurers and to enhance supervisory convergence across Europe. The draft Opinion sets out EIOPA’s expectations to national competent authorities on how to supervise the integration of climate change scenarios by insurers in their ORSA, applying a risk-based and proportionate approach.
In particular, supervisors should expect insurers to subject material climate change risks to at least two long-term climate scenarios, where appropriate:
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a climate change risk scenario where the global temperature increase remains below 2°C, preferably no more than 1.5°C, in line with the EU commitments; and
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a climate change risk scenario where the global temperature increase exceeds 2°C.
EIOPA will consider the feedback received and expects to publish the final Opinion in the spring of 2021 together with a feedback statement on the consultation responses.