IIF Authors

Status: Will be live at 02/27/2024 09:15

IIF Response to IAIS Draft Application Paper on Climate Market Conduct Risk

On November 23, the IAIS published a public consultation on climate risk market conduct issues in the insurance sector, which aims to support supervisors in their efforts to identify instances of potential unfair treatment of consumers in relation to natural catastrophe protection products or sustainability focused products. The IIF submitted its response on February 23, in which it advises that the IAIS address the two topics – greenwashing more broadly, and considerations related to insurance products that provide coverage for natural catastrophes – separately, and to align its work on greenwashing with the recent work conducted by the International Organization of Securities Commissions (IOSCO).

More broadly, the IIF argues that greenwashing is not a new risk category and jurisdictions should consider whether existing requirements are sufficient to tackle greenwashing in their markets. The prescriptive tone of the Draft Application Paper does, however, limit jurisdictional flexibility to do so. In particular, conduct concerns regarding accuracy and clarity in describing the investment component of an insurance product are already ad-dressed by robust rules regarding the avoidance of deceptive and misleading advertising or practices and by penalties for violation of those rules. The response further emphasizes the importance of insurers' retaining control over pricing and product development based on risk assessments.

Finally, the IIF discussed the need to return to a principles-based approach in drafting Applications Papers, which are intended to provide supporting material related to specific supervisory material in the ICPs or ComFrame, and as such should not include new requirements that go beyond the scope of the existing ICPs.