Consultation response
In its response to the latest IAIS consultations on climate risk supervision, Finance Watch welcomed a focus on macroprudential supervision and progress on information availability, but called for stronger guidance to tackle address the specific nature of these risks.
It its response to the latest IAIS consultations on supervisory guidance on climate risk for insurance supervisors, Finance Watch supports taking action at a macroprudential level to address climate risk, but calls on the IAIS to strengthen the draft Supporting Material by recognising the systematic underpricing of exposures subject to a higher degree of transition and stranding risk to avoid concentrations. The guidance should build on the recent work of EIOPA on the prudential treatment of sustainability risks. Our response to the relevant EIOPA consultation on this can be found here.
The draft Application Paper on public disclosure and supervisory reporting of climate risk recognises the inherently forward-looking, non-linear and exponential nature of these risks. It also highlights data gaps at the undertaking level to measure climate risks. More guidance is needed, however, to underline transition plans as an important source of data and information on climate risk.
Caution is generally needed over using climate scenario analyses in the context of both the draft Application paper and the draft Supporting Material. Climate scenario analyses have significant limitations that still need to be addressed and should be outlined in the guidance, as outlined in our “Finance in the Hot House world” report and our response to the IAIS consultation on climate scenario analysis.
Background
The IAIS conducted the first and second consultations on climate risk in 2023, and a third was launched in March 2024. This is the fourth and final consultation. The IAIS will respond comprehensively to the comments received at the end of the project.
The consultations propose changes to guidance in various Insurance Core Principles (ICPs) and on new supporting material to better incorporate climate risk.
Read our responses
Our response on the draft Application Paper on public disclosure and supervisory reporting of climate risk:
Our response on the draft supporting material on macroprudential and group supervisory issues and climate risk:
