BOE: The Impact of Climate Change on the UK Insurance Sector 2015

Climate change is a slow-moving process relative to many other public policy issues. Nonetheless, the future of the world’s climate system is likely to be heavily dependent on actions over the next few decades.

Many of the insurance firms which the PRA supervises underwrite risks internationally, have operations in multiple geographies, and invest in global financial markets. As a forward-looking regulator with oversight of the third largest insurance industry in the world, the PRA accepted an invitation from the Department for Environment, Food & Rural Affairs (Defra) to examine the impact of climate change on the PRA’s objectives in relation to insurers. This report is informed by: (i) responses from 30 PRA-regulated life and general insurance firms; (ii) four roundtable discussions with the insurance industry; and (iii) discussions with a range of stakeholders, including academics, credit rating agencies, technical experts and industry associations. The report draws on, and reflects external research to a very considerable extent.

This report is intended to fulfil the requirements of Adaptation Reporting and inform the UK Climate Change Risk Assessment due to be laid before Parliament in 2017. The report will also inform the Bank’s future work on these issues and the PRA hopes the analysis may be helpful in contributing to wider international dialogue ahead of the upcoming Paris meeting of the Conference of the Parties to the UN Framework Convention on Climate Change.

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