General Insurance Article - PwC on PRAs statement on managing risks from climate change

 "In their Supervisory Statement, the PRA demonstrates it’s serious about addressing the risks from climate change that threaten the financial stability of banks and insurers.

 “The proposed requirement for Boards to better understand financial risks from climate change, including the requirement to appoint a Senior Manager with responsibility for managing climate risks, will help ensure firms have the right skills and level of oversight needed to respond to this complex problem. Having fully-engaged Board members and the right governance structures in place are essential if firms are to take the long-term, strategic approach required.

 “It’s encouraging that some banks and insurers are now taking climate-related financial risks seriously, but there’s still lots of progress to be made to ensure resilience through the transition to a lower-carbon economy. The PRA’s own survey shows that whilst 70% of banks see climate change as a financial risk, only 10% of them are managing these risks comprehensively. The TCFD status report, published last month, also shows that the majority of banks are not disclosing on climate governance and find it challenging to integrate climate change into business strategy and risk management. Given the Intergovernmental Panel on Climate Change's (IPCC) recent report on the impacts of global warming and the urgency of reducing carbon emissions, it’s vital that financial institutions both better manage the risks and benefit from the opportunities that addressing climate change will bring.

 “The PRA recognises the importance of improving transparency through climate risk disclosures to help make markets more efficient, and economies more stable and resilient. We hope many will consider adopting the framework proposed by the TCFD to provide consistent and comparable 'decision-useful' information across the industry.”