This is part 3 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here the working party discusses EIOPA and gives a brief overview of the current and upcoming requirements.
Formed in 2011, the European Insurance and Occupational Pensions Authority (EIOPA) supervises both insurance and occupational pension schemes in the EU, acting as the lead regulator for the bloc. Countries that have adopted its creations, such as Solvency II, will likely either feel pressure or be required to adopt any future decisions by EIOPA.
EIOPA is responsible for:
The Solvency 2 framework can be viewed as being made up of 3 pillars. Broadly, these are:
From 2022, assessments of climate risk (including various scenarios) must be included in pillar 2, the ‘own risk and solvency assessment’ (ORSA), for EU insurance companies reporting under Solvency II.
Though there have been changes to pillar 2 requirements to incorporate climate change (mentioned above), currently pillar 3 disclosures have not been explicitly amended to incorporate climate change-related impacts. Pillar 2 requirements are not disclosed externally but submitted to the regulator for review.
Current SCFR templates do not have an explicit section for climate change-related impacts. However, recent submissions by insurers have started to include ‘green bonds’ . See: Examples of climate risk disclosure in SFCR.
All EU-based insurance business and pensions schemes are supervised by EIOPA. Actuarial advice to these will need to take EIOPA guidance into account. Actuaries working for clients in non-EU countries that have adopted EIOPA rules in the past, such as the UK, may also be affected. Other regulators, for example in the UK, may look towards EIOPA’s vision and adapt any future recommendations. See also section below.
On 1 June 2023, the EU's supervisory authorities (ESAs, which include EBA, EIOPA, and ESMA) published their progress reports (see EBA, EIOPA, and ESMA reports) on greenwashing, where they shared initial findings on greenwashing. The progress reports include defining greenwashing, where and how greenwashing occurs in the insurance and pension sectors, gaps in current legislation that may lead to greenwashing, and tackling greenwashing for example via supervision. The ESAs aim to publish final conclusions by May 2024.
Supporting sustainable finance is part of EIOPA’s remit. EIOPA’s 7 key areas of activity on sustainable finance for 2022-2024 are to:
Given this, we expect continued changes to regulations and recommendations from EIOPA, including potential changes to the reporting templates (pillar 3 mentioned above) to show a specific impact for climate change-related activities.
Below is a list of websites which we hope that you find useful.
What are your thoughts on the points raised in this article?
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To find out more, visit: Sustainability: research working parties
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.