Insurance Europe has responded to an opinion paper published by the European Insurance and Occupational Pensions Authority (EIOPA) on sustainability in Solvency II.
In its response, Insurance Europe stated that the Solvency II framework requires greater clarity on both the valuation of liabilities and the scope of impact underwriting.
Furthermore, it recommended increased transparency of categorisation of sustainable investment strategies; some of which are currently implemented in an attempt to create a sustainable economy include prevention and adaptation, loss compensation and long-term investment in sustainable assets.
Regarding climate change risk, Insurance Europe advocated long-term scenario analysis, as sustainability risks are already integrated into the existing Solvency II framework.
Insurance Europe reiterated that the current Solvency II framework is “not a barrier” to sustainability integration, as it incorporates risk management, governance and the own risk and solvency assessment (ORSA).
However, Insurance Europe also highlighted that the ORSA should remain company-specific, advising against “the direct incorporation of a uniform quantitative approach … based on a standardised set of climate change scenarios”.
Insurance Europe concluded by recommending that insurers be given “maximum flexibility to use the most suitable tools to deal with sustainability risks in line with their undertakings’ specificities”.