Irish Central Bank Launches Consultation on Climate Risk for Insurers
According to the bank’s 2021 survey, only 20% of insurers and reinsurers fully integrated climate-change risk in their risk management framework.
- Timothy Darragh
- September 2022
The Central Bank of Ireland is undertaking a public consultation on proposals to create guidance for the insurance sector on climate-related risk. The increase in insured claims arising from weather-related events, along with the impact of actions to transition away from greenhouse gas-intensive activities, mean that insurers and reinsurers need to take action now to assess and appropriately manage climate change risk, the central bank said in a statement.
However, the bank noted that there is no agreement on what to do and where to begin.
According to a survey the bank published in 2021, only 20% of insurers and reinsurers fully integrated climate-change risk in their risk management framework, with less than half conducting some form of scenario analysis of stress testing.The proposed guidance intends to clarify the central bank's expectations on how companies address climate-change risks and to assist them in developing their governance and risk management frameworks, it said.
“We have identified the need to strengthen the resilience of the financial system to climate-related risks and supporting the transition to a carbon-neutral economy as an integral theme of our strategy,” Central Bank Governor Gabriel Makhlouf said. “Climate change is no longer an emerging risk—the stakes are high, not just for the future viability of the insurance sector, but also for society as a whole. The Central Bank expects to see a step change in the way that (re)insurers are responding to climate change risks, and we look forward to further and continued engagement with stakeholders on this important topic.”