Open letter
In a letter signed by 22 civil society organisations and experts, Finance Watch urges Commissioner Albuquerque to follow up to EIOPA’s November recommendation to introduce higher capital requirements for fossil fuel assets as soon as possible.
Finance Watch has long been repeating that if transition risks related to fossil fuels are left underpriced, investment decisions of insurers will be distorted towards a high share of fossil fuels, leading to a growing risk of disorderly transition and a growing physical risk of climate change.
In a clear warning in November 2024, the European Insurance and Occupational Pensions Authority (EIOPA) had recognised that the financial risks of fossil fuel investments are set to rise as fossil fuel assets lose value in the transition to a carbon-neutral economy and recommended adjustments to solvency capital requirements for insurers to account for underpriced climate risks associated with fossil fuel assets.
As policyholders and taxpayers, European citizens expect insurance companies to protect them from current and future risks and EU legislators to guarantee the safety and soundness of the undertakings they regulate. Yet, the European Commission has failed to include a targeted review of Solvency II in its 2025 Work Programme to address this issue.
Against this background, Finance Watch’s letter, also signed by 21 other civil society organisations and experts, calls on Commissioner Albuquerque to change tack with timely amendments to Solvency II to address the problem while it is still manageable and avoid huge costs for both taxpayers and insurers down the line.
