GFSC assessing risk of climate change

The Guernsey Financial Services Commission said that an increasing number of central banks and global regulators were reflecting on their contribution to climate change mitigation – with several initiatives already in place – amid protests locally and internationally for action.

‘Societal and technological responses to the threats by climate change are developing rapidly.

‘The issues raised in the discussion paper will only increase in importance over time,’ said GFSC banking and insurance division director Jeremy Quick in a feedback statement in response to a commission discussion paper on green insurance released in October 2018.

‘The commission therefore remains committed to developing a green insurance agenda.

‘In particular, whilst acknowledging the risks to insurers resulting from climate change, the commission is keen to support the further development of a regulatory policy towards insurance that limits and mitigates climate change.

‘The commission remains open to discuss innovative proposals in this respect.’

The GFSC was also continuing to observe how other supervisors address green insurance.

‘The USA is currently considering climate change risk within its solvency model and there may be benefits from aligning with that should it address climate risk more comprehensively,’ added Mr Quick.

The commission would continue to work with third parties, including Guernsey Green Finance, to help develop the island’s green finance strategy in the context of green insurance as well as with international bodies and regulators.

Mr Quick also said: ‘The commission has begun to assess the risk of climate change to financial services businesses in the Bailiwick of Guernsey and for this purpose has shaped a series of sector-specific questions – including for Guernsey insurers – for front-line supervisors to discuss with licensees.’

The GFSC feedback statement also set out a number of responses to the commission’s original discussion paper on green insurance last year.

‘The consensus was generally supportive of the commission’s main proposal to develop green insurance,’ said Mr Quick.

‘Another respondent said that the global insurance industry could play a part in the mitigation of carbon emissions, not least as life insurers are predominantly long-term debt investors.

‘However, the legislative and market infrastructure for green investment, whilst improving, was still not robust enough for meaningful investment.

‘One respondent noted that effective capital stewardship was an important part of protecting the environment, and was more widely pursuing the UN Sustainable Development Goals.

‘A green insurance initiative would help diversify and strengthen Guernsey’s financial services sector.’