The Application Guidance follows up on the Opinion on the supervision of the use of climate change risk scenarios in the ORSA (the “Opinion”) that EIOPA published in April 2021. It aims to reduce implementation costs for insurance and reinsurance undertakings (collectively, the “Undertakings”) and enhance the comparability of reported information.
The Application Guidance is not intended to be an EIOPA supervisory convergence instrument or a mandatory tool. Instead, it should be seen as an initial aid to guide Undertakings on how to include climate change risks in the ORSA.
Undertakings are encouraged not to limit their efforts to topics in the Application Guidance, but to go a step further, exploring alternative ways of looking at climate change risks.
The Application Guidance is divided into three chapters:
- Chapter 1 describes the different parts of the ORSA in which Undertakings can address climate change risks;
- Chapter 2 provides general insight on the materiality assessment that Undertakings must perform and the climate change scenarios they must consider;
- Chapter 3 provides Undertakings with practical examples, by using mock (“dummy”) non-life and life companies to help them determine how to set up their materiality assessment and run their climate change scenarios. The “dummy” companies were specifically constructed by EIOPA to “produce concrete examples and make the exercise more relevant for Undertakings to use when assessing their exposure to climate change risk in the ORSA”.
- Read EIOPA’s Application Guidance here_
- Read EIOPA’s feedback statement on the Application Guidance here_
- Read EIOPA’s Opinion of April 2021 here_
- See our timeline on key ESG milestones in the banking and insurance sectors here_
If you need more information, please do not hesitate to contact us.