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Has enough attention been paid to collective financial exposure to climate risk?

last modified Apr 30, 2015 12:34 PM
20 March 2015 – The University of Cambridge Institute for Sustainability Leadership and ClimateWise are facilitating a series of roundtables during 2015, bringing together key insurance leaders, experts and academics with the Bank of England Prudential Regulatory Authority.

The role of financial regulation is to ensure that excessive risks that would threaten the stability of the financial system – and hence imperil the stability and sustainability of the economy – are not taken. However, little is known about whether our financial system is resilient to systemic environmental risks such as climate change. Has enough attention been paid to collective financial exposure to climate risk? 

The insurance industry has increasingly been the focus of such questions. In the US, the Securities and Exchange Commission's Guidance Regarding Disclosure Related to Climate Change and the National Association of Insurance Commissioners' Climate Risk Disclosure Survey have sought greater disclosure on the management of climate risk by insurers. In China, regulations are being developed across the financial services sector, including insurance, to ensure that environmental risks are fully accounted for. Meanwhile in the UK, insurers have been asked to respond to questions on how climate change affects their business to inform the Bank of England Prudential Regulatory Authority (PRA)’s own reporting to government. 

Establishing the balance of initiatives between the industry and the regulator in response to this risk is crucial. To respond to this, the University of Cambridge Institute for Sustainability Leadership and ClimateWise are facilitating a series of roundtables during 2015 to better inform this discussion, bringing together key insurance leaders, experts and academics with the PRA. 

The first roundtable was held in February 2015 and explored what it would mean if the catastrophic losses of 2005 and 2011 were to become the 'new normal' and whether more common approaches are needed to understand impacts.

Read the summary of the February roundtable.

The second roundtable was held in March 2015 and explored the market implications of climate risk, using the real estate sector as a case study. The discussions focused on whether insurers' core risk management expertise could be better applied to manage the risks to which insurers are exposed on the asset side of their balance sheet, as a result of the physical impacts of climate change.

Read the summary of the March roundtable.

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