European Commission proposal for review of Solvency II Directive

ClientEarth argues that the European Commission's proposed amendments to the Solvency II Directive are insufficient to manage climate-related risks. The organization recommends requiring insurers to model extreme warming (3°C+) and disorderly transition scenarios over a minimum 30-year period. It further advocates for 'double materiality' in risk management to account for the environmental impact of underwriting and calls for fast-tracking EIOPA's analysis of capital requirements for fossil fuels to mitigate systemic financial risks.

• ClientEarth argues that the current proposal for climate scenario analysis lacks sufficient detail and could allow insurers to avoid accurately assessing risks. It recommends that insurers be required to model three specific scenarios: a 'Hothouse world' with 3°C or more of warming, an 'Orderly transition' limiting warming to below 2°C, and a 'Disorderly transition' where delayed policies lead to higher costs and physical risks.
• The document suggests that the term 'long-term' used in the Proposal for scenario analysis is too vague and should be explicitly defined as at least 30 years to align with the 2050 net-zero emissions target.
• ClientEarth proposes amending Pillar 2 risk management requirements to include 'double materiality,' which would force insurers to manage both their exposure to environmental and social risks and the actual impact of their underwriting activities on the environment and society.
• The organization contends that current Solvency II capital requirements do not adequately reflect the risks associated with fossil fuels. It suggests that fossil fuel investments and underwriting should be placed in the highest risk category, with new projects requiring a 100% capital requirement.
• ClientEarth criticizes the proposed June 2023 deadline for EIOPA's report on the prudential treatment of environmental and social exposures as being too late to be effective. It urges the Commission to fast-track the specific analysis of fossil fuel capital treatment to June 2022.

APA

Etherton, J., & Eziefula, D. (2022). European Commission proposal for review of Solvency II Directive. ClientEarth. https://www.clientearth.org/media/np5fgcje/clientearth-feedback-on-european-commission-solvency-ii-reveiw-proposal.pdf

Chicago

Etherton, Joanne, and Dan Eziefula. European Commission proposal for review of Solvency II Directive. ClientEarth, 2022. https://www.clientearth.org/media/np5fgcje/clientearth-feedback-on-european-commission-solvency-ii-reveiw-proposal.pdf.

Wikipedia

{{cite press release |last1=Etherton |first1=Joanne |last2=Eziefula |first2=Dan |title=European Commission proposal for review of Solvency II Directive |publisher=ClientEarth |date=January 2022 |url=https://www.clientearth.org/media/np5fgcje/clientearth-feedback-on-european-commission-solvency-ii-reveiw-proposal.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{etherton2022european, author = {Etherton, Joanne and Eziefula, Dan}, title = {{European Commission proposal for review of Solvency II Directive}}, publisher = {ClientEarth}, year = {2022}, month = jan, url = {https://www.clientearth.org/media/np5fgcje/clientearth-feedback-on-european-commission-solvency-ii-reveiw-proposal.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }