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18 July 20234 minute read

New Insurance Industry Guidance on Climate Change Risk Published by Irish Regulator

The Central Bank of Ireland (CBI) published its Guidance for (Re)Insurance Undertakings on Climate Change Risk earlier this year (the Guidance)1, which applies to insurers and reinsurers, including captive (re)insurers and branches of third-country insurance undertakings authorised by the CBI. The Guidance sets out one approach, but firms are free to use other approaches, provided they produce similar outcomes; noting that the principle of proportionality will apply in respect of the implementation of the Guidance.

In recognising that there is “a broad willingness in [the] industry to act” the Guidance is aimed at providing clarity on the CBI’s expectations of how (re)insurers should address climate change risk in their business, without having to introduce new requirements on (re)insurers in relation to climate change risk, but simply seeking to clarify its expectations in this area2.


Overarching Principles

The six overarching principles to which firms should have regard when assessing and managing climate change risks are:

  • Firms have to adopt an iterative approach towards the integration of climate change risk into their governance and risk management framework.
  • Climate change risk should no longer be considered by firms as an emerging risk but is now a key risk and should be managed accordingly.
  • Firms have to consider the impact that climate change has on their business, as well as the impact that the (re)insurer’s activities have on the climate (ie double-materiality).
  • ORSA has a central role to play in enabling firms to develop an integrated role to climate change risk.
  • Firms will have to consider the impact of climate change over the short, medium and long term.
  • Lastly, where (re)insurers leverage group policies and activities relating to climate change risk, there should be appropriate adaptations for the local entity, including an assessment of the appropriateness of a group ORSA for the local entity.


The Guidance emphasizes the following six key aspects:
  1. Importance of the board, committees and senior management in understanding and appropriately considering the risks that climate change poses to the (re)insurer, and their responsibility for identifying and managing financial and operational risks arising from climate change.
  2. Preparation of a materiality assessment, under which firms consider the extent of their exposure to climate change risk. When developing a materiality assessment, firms are encouraged to have regard to the EIOPA Opinion3 and Application Guidance4.
  3. Scenario analysis and the ORSA. Firms should quantify the financial impact of the baseline climate change scenario over short-, medium-, and long-term business planning horizons, and choose an appropriate range of climate change scenarios based on the nature, scale, and complexity of their business.
  4. Strategy and business model of (re)insurers. The CBI expects that firms consider climate change risks in their ongoing strategic decision-making and that these are appropriately integrated into the business models.
  5. Risk appetite statement devised by (re)insurers. Firms with a material exposure to climate change are expected to incorporate climate change risk into their risk appetite statement.
  6. Embedding climate change risk considerations across the business utilising existing risk management frameworks. The Guidance also sets out the CBI’s expectations in relation to the treatment of climate change risk in the context of Reserving and Capital, Underwriting and Pricing, and Investments.



While it is too early to get a sense of the approach the CBI will adopt to assessing firms’ level of adherence to the Guidance, we expect that through firm-specific inspections and perhaps thematic inspections, the CBI will begin to monitor the steps being taken by firms to achieve compliance with the Guidance. We expect that the CBI will be pragmatic in its approach. For instance, we note the CBI’s recognition within the Guidance that there will be challenges for (re)insurers in certain areas, and that an iterative approach will be necessary as firms adapt and improve the scope, depth and sophistication of their approaches over time. Against the background of the principle of proportionality, the CBI will calibrate its expectations by reference to the nature, scale and complexity of the firm.

1 The Guidance should be read in conjunction with the accompanying infographic.
2 Based on the existing Solvency II prudential requirements and also the Commission Delegated Regulation ((EU) 2021/1256).
3 Opinion on the supervision of the use of climate change risk scenarios in ORSA. (EIOPA-BoS-21-127) (2021).
4 Application guidance on running climate change materiality assessment and using climate change scenarios in the ORSA (EIOPA-BoS-22/329) (2022).