The Bank of England (BoE) has written to 30 insurance and reinsurance companies as it seeks to better understand the risk that climate change poses to their solvency and earnings.
Business daily the
reports that it has seen a letter from the BoE which asks whether the companies have assessed when rising temperatures or more frequent weather extremes might begin to affect their earnings, solvency or even viability as a business. The letters also ask whether insurers have considered the impacts of climate change in their assets and investments.
Regulators also enquire as to what re/insurers think of ‘the role of regulation’ in climate change, according to the
, which possibly marks the first time any regulator has directly addressed the possibility of oversight for re/insurers regarding climate change.
The BoE is surveying these re/insurers from the life and general insurance sectors in response to an invitation from the UK environment department which is undertaking a climate assessment.
Insurers and reinsurers have periodically been exposed to sharp losses in recent years from natural disasters such as hurricanes. Insurers are also aiming to improve the returns they make from investing their insurance premiums.
The issue has also become increasingly relevant to global investors, some of whom are looking to low carbon investments as a way to benefit from attempts to counteract the adverse effects of climate change.
Concerns have been expressed that insurers, reinsurers and the growing insurance linked securities (ILS) market may underestimate their exposure to climate change risks and that more needs to be done to understand and manage these risks.
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