PRA ANNOUNCES PLANS TO INCREASE FOCUS ON CLIMATE CHANGE RESILIENCE

The Prudential Regulation Authority (PRA) plans to put increased focus on resilience to climate change and supporting an orderly financial transition to a lower carbon economy as climate change becomes increasingly relevant to financial regulation. The UK regulator is currently considering the best approach to insurance supervision given increased risks from climate change. It said it would be reviewing its business model analysis and stress-testing framework to ensure it reflects the latest views on climate change risk factors. In a report on impact of climate change on the UK insurance sector, the PRA said its approach will focus on promoting resilience to climate change and supporting an orderly financial sector transition to a lower carbon economy. It said it will do this through a combination of international collaboration, research, dialogue and supervision. It also plans to carry out a thematic review of insurer’s Own Risk and Solvency Assessment (ORSA) to determine the extent which insurers have taken changing climate into account. “Climate change is becoming increasingly relevant to financial regulation,” the PRA said in the report. The regulator is also planning to collaborate internationally on climate change such as its focus on participating in the United Nations, and further research into the possible impact on the insurance industry.