Advice on sustainable finance EIOPA to European Commission

On 3 May 2019 EIOPA published its technical advice to the European Commission (EC) on the integration of sustainability risks and factors relating to “ESG” (Environmental, Social and Governance) considerations with regard to insurance undertakings and insurance intermediaries into the delegated acts under Solvency II and the IDD. EIOPA’s advice supports the EC’s Action Plan: Financing Sustainable Growth. Click here for the advice and here for EIOPA’s press release.

A key aspect of the advice is the integration of sustainability in the prudent person principle for investments under Solvency II. In particular, insurers should reflect the impact of their investments on sustainability, promoting a stewardship approach by insurers and reinsurers. At the same time, EIOPA emphasises the relevance of integrating sustainability risks in the investment decisions and underwriting practices.

In respect of product design and distribution, EIOPA calls for the introduction of a clear reference to ESG considerations in the implementing rules of the IDD on product oversight and governance as well as on conflicts of interest. Furthermore, EIOPA proposes an explicit link between the prudent person principle and the target market assessment in the product oversight and governance arrangements to ensure the delivery of ESG characteristics of a product, if promoted as such.

It is now up to the EC to adopt the updated delegated acts. Once adopted by the EC, the delegated acts will enter into force after their publication in the Official Journal, unless the European Parliament and the Council object to them.”