Measures linked to climate change-related risks should be applied proportionally under the revision of Solvency II, says FERMA, while welcoming the opinion on sustainability within Solvency II from the European insurance and pensions regulatory body EIOPA.

In its response to a request for comment from the European Commission, EIOPA says that Solvency II is well equipped to accommodate sustainability risks and factors, but climate change brings considerable challenges. It stresses the importance of scenario analysis for (re)insurance entities in their management of climate-change related risks.

FERMA believes that smaller and less complex Insurers already have the means to deal efficiently with sustainability risks under Solvency II through the financial markets or modelling of catastrophic exposures.

For such insurers to capture these risks these risks should not require additional complex methodologies beyond balanced and specific adjustments. Where necessary, they can get the support of brokers and reinsurance who have greater analytical resources.

Click here to FERMA position paper