Final Report on the Prudential Treatment of Sustainability Risks for Insurers

The Article 304c of the Solvency II Directive mandates EIOPA to assess the potential for a dedicated prudential treatment of assets or activities associated substantially with environmental or social objectives, or harm to such objectives, and to assess the impact of proposed amendments on insurance and reinsurance undertakings in the European Union.

In this report, which comes as a response to above-mentioned mandate, EIOPA is recommending additional capital requirements for fossil fuel assets on European insurers’ balance sheets to accurately reflect the high risks of these assets. The report’s findings are based on a risk-based analysis of data and evidence, and take into account the feedback received from stakeholders on EIOPA’s Discussion Paper on methodologies and data sources as well as during a public consultation on preliminary findings and policy proposals. The report covers three distinct areas: the market risk of assets exposed to the climate transition, the impact of climate risk-related prevention measures on non-life underwriting risks and the treatment of social risks.