Status: Will be live at 05/30/2023 14:47
IIF Response to IAIS Climate Supervisory Guidance Part One
On May 17, the IIF responded to the IAIS consultation on Climate Risk Supervisory Guidance – Part One, the first of three consultations expected over the next 18-months on proposed changes to supervisory guidance incorporating climate-related risks. In this first consultation, the IAIS outlined proposed changes to the Insurance Core Principles (ICP) Introduction, which positions climate risk within the global framework for insurance supervision. It also dis-cussed whether it is necessary to make changes to the existing supporting material related to corporate governance (ICP 7), risk management and internal controls (ICP 8); and sought stakeholder feedback on the IAIS’s overall cli-mate-related work as it relates to supervisory guidance.
In its response, the IIF emphasized that the IAIS’s guidance should clearly recognize the role of climate-related transition and physical risks as (one of many) drivers of the financial risks (e.g. underwriting, market and credit risks) that insurers already manage in their day-to-day operations. Supervisory approaches should be practical, proportionate, and sequential, driven by data and risk analyses. The IIF also noted that the final guidance should recognize the ongoing challenges in quantifying climate-related risks. Supervisors should be encouraged to focus on the desired prudential outcomes, rather than on the path an insurer takes to reach that outcome, given the wide range of insurance business models and product lines. Relatedly, insurance supervisors should not require transitions plans or treat them as prudential tools or as part of their supervisory mandates. The IIF encouraged an approach to transition plans that is owned, developed and implemented by the insurers that is reflective of their internal enterprise risk management frameworks and strategic planning. Finally, the IIF emphasized the continued need for engagement with key stakeholders in the insurance industry as it develops final guidance on this topic.