Carolyn Cohn, Huw Jones

LONDON (Reuters] – European climate stress tests could soon be administered to insurance companies in Europe, according to the EU regulator for insurance. This was stated at Thursday’s Reuters Future conference.

Climate change risks are a concern for the insurance industry, both in terms of its exposure to fossil fuels underwriting and individual investor portfolios.

Petra Hielkema (chairperson, European Insurance and Occupational Pensions Authority) stated that although tests are scheduled for 2024 or later “it may be we want this one to happen sooner”.

Hielkema however, speaking as part of a panel discussing climate change said “no specific planning” was in place for the 2023 test.

Hielkema indicated that the stress tests of pension funds in 2017 will likely be focused on climate change.

Anna Sweeney was the Bank of England’s insurance executive director. The central bank is currently running its first climate stress testing for banks and insurers. These results are due by the end of the first quarter of 2022.

The panel was told by her that “we’ve had to ask for the resubmissions of some firms where it has been felt there hasn’t been sufficient due diligence…or enough transparency.”

To view video, click: https://vimeo.com/642406430/6267b6e568

Sweeney, Hielkema both stated that they would not place capital requirements on their tests. Hielkema stated that a carbon tax is a more effective way to motivate companies to address climate change risks than capital requirements.

Alison Martin from Zurich Insurance’s EMEA CEO, stated that the carbon price is needed as part of the “ensemble of mechanisms” to make the transition easier.

Martin stated that there are nearly 70 carbon price mechanism versions. It is difficult to find a harmonised one.

At the U.N. Climate conference in Glasgow, delegates are arguing about Article 6 of the U.N. Convention on Climate Change. This is the part that discusses markets to trade carbon emissions.

Harmonizing these global rules and agreeing upon a carbon price will be the most difficult tasks.

Marie Niemczyk (head of insurance relations for Candriam), told the panel that although a carbon tax would make investing easier, “it must be high enough” to deter investors.

For more on the Reuters Future of Insurance Europe conference please click here https://reutersevents.com/events/insuranceeurope