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  "documentTitle": "Sustainability Risk Under Solvency II",
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  "authorName": "Oliver Wyman",
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  "notes": "Includes references to EIOPA-BoS-19/241 and EIOPA-BoS-20/341.",
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      "kind": "callout",
      "text": "The regulator has strongly indicated the necessity to include climate risks into Pillar II requirements. The exact design is still subject of ongoing discussions.",
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      "text": "The EIOPA discussion paper on Methodological Principles of Stress Testing, published in June 2020, sets out a detailed framework for climate risk scenarios: The focus lies on transition risks and physical risks. Various transmission channels are identified through which climate risks can materialize. The use of IPCC scenarios from integrated assessment models (\"IAMs\") is recommended for a forward-looking approach. Scenarios can be constructed at various levels of granularity. The aggregation level should strike a balance between comparability, complexity and appropriate asset valuation. For the quantification of impacts, various approaches are discussed for different asset classes.",
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      "text": "At the request of the European commission, EIOPA published an opinion on sustainability risk within Solvency II. This opinion provides important guidelines for the treatment of climate risks for insurers, in particular: Sustainability risk may also arise on shorter time horizons relevant for Pillar I and II requirements. In particular, climate policy related risks (\"transition risks\") could trigger sudden asset revaluations. The calibration to historical data is not appropriate to the problem at hand. Climate risks must be considered on a forward-looking basis. For material risks, a quantitative consideration is required. In the medium term, integration into risk capital requirements is also suggested.",
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      "text": "EIOPA-BoS-20/341: Discussion paper on methodological principles of stress testing",
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      "text": "EIOPA-BoS-19/241: Opinion on sustainability within Solvency II",
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      "text": "1. In particular, there is an recent consultation on a draft opinion on the use of climate change scenarios in ORSA, see EIOPA-BoS-20/561.",
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      "text": "THE REGULATOR HAS ALREADY SET OUT DETAILED GUIDELINES ON THE TREATMENT OF CLIMATE CHANGE RELATED RISKS",
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