Managing sustainability risks

Integration of sustainability risk assessment in prudential regulation

Sustainability risks can affect the assets and liabilities of insurers and occupational pension providers. Regulatory requirements aim at ensuring risks are properly identified and managed. EIOPA has issued advice and guidance to support the sectors’ sustainability risk management, addressing governance requirements, own risk (and solvency) assessment, as well as the prudential treatment of sustainability risks related to insurers’ assets and liabilities.

• Discussion paper on prudential treatment of sustainable assets and liabilities 
• Application guidance on running climate change materiality assessment and using climate change scenarios in the ORSA
• Technical advice for the review of the IORP II Directive
• Methodological paper on potential inclusion of climate change in the natural catastrophe standard formula
• Technical advice to EC on the integration of sustainability risks and factors in Solvency II and in the Insurance Distribution Directive
• Opinion on the supervision of the use of climate change risk scenarios in ORSA
• Opinion on sustainability within Solvency II
• Opinion on the supervision of the management of ESG risks faced by IORPs

Stress testing

EIOPA carries out regular stress tests to assess how well the European insurance and occupational pensions sectors are able to cope with severe but plausible adverse developments of financial and economic conditions. Stress test results help supervisors identify the vulnerabilities of the insurance industry and find ways to improve its resilience.

Stress test exercises also include elements to assess the vulnerability of insurers or occupational pension funds to sustainability-related risks, such as climate change.

• IORP stress test with climate aspects
• Methodological principles of insurance stress testing - climate change component
• IORP stress test report addresses IORPs’ ESG and greenhouse gas exposures

See all our insurance stress test exercises

See all our pensions stress test exercises

Sensitivity and risk analysis

EIOPA carries out analysis to support insurers and supervisors in addressing sustainability risks.

• Staff Paper on nature-related risks and impacts
• Sensitivity analysis of climate-change related transition risks
• Analysis on climate-related exposures in insurers’ investment portfolios
• Climate physical risk analysis

Risk dashboard (ESG)

The Risk Dashboard, based on Solvency II data, summarises the main risks and vulnerabilities in the European Union’s insurance sector through a set of risk indicators. It includes ESG related risks.

• Insurance Risk dashboard

Thematic articles

Research articles carried out by experts at EIOPA. 

• Thematic article on climate Risk Assessment of the sovereign bond portfolio of European insurers
• Thematic article on impact of Green Bond Policies on Insurers: Evidence from the European Equity Market
• Climate change, catastrophes and the macroeconomic benefits of insurance
• Assessing future river flood risk for the European insurance sector using the open-source CLIMADA model