IAIS releases third consultation on proposed climate mandates

May 8, 2024|Written by Moriah Costa|International Association of Insurance Supervisors

The International Association of Insurance Supervisors (IAIS) has launched its third consultation on proposed changes to its core principles as part of its multi-year project to consider how supervisors should approach climate change risk.

“An adequate response from supervisors to climate-related risks will support the objectives of insurance supervision of protecting policyholders, contributing to financial stability and promoting the maintenance of a fair, safe and stable insurance market,” the IAIS said in a press release.

The association, which represents insurance regulators and supervisors from over 200 jurisdictions, is taking comments on proposed changes around corporate governance, risk management, valuation of assets and liabilities, and investment activities.

While the consultation process is not yet done, with the fourth and last consultation expected later in 2024, insurance companies and associations were mostly opposed to the IAIS’s prior climate mandate consultation in 2023. Although the group is voluntary, it informs the policies of national and local regulators.

The proposed changes include a suggestion that insurers consider the effects of climate change on their investments, as “investment decisions, especially at a large scale, could in turn also negatively impact climate change, potentially leading to financial impacts on insurers’ investments”. Taking risks into account could allow insurers to take steps to divest or engage with investees or even change their investment strategy, the proposal states.

Elsewhere, the guidance would be changed to include climate-related risk in an insurer’s risk management framework, as well as stress testing climate-related risks over the short, medium and long-term.

Other proposed changes include having insurers demonstrate that the board has climate-related expertise either internally or externally, as well as consider forward-looking assessments with different time frames to better capture “the complexity and uncertainty of climate-related risks” and not just rely on historical data and trends.

Comments on the proposed changes are due by 19 June 2024. The IAIS said it would respond to all consultation comments at the end of the project.

This page was last updated May 8, 2024

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