HM Treasury Consultation on Review of Solvency II

ClientEarth argues that the HM Treasury's review of Solvency II fails to address climate risks and proposes several regulatory changes. Key recommendations include making investments in new fossil fuel exploration and development ineligible for the matching adjustment and requiring a 100% capital charge for such exposures to prevent stranded asset risks. The document also calls for mandatory, embedded transition plans for insurers, the adoption of 'double materiality' to manage the sector's impact on the environment, and formal Pillar 2 requirements for long-term climate scenario analysis. Additionally, it urges the government to impose express environmental duties and transparency requirements on the Society of Lloyd's to manage the climate impact of the Lloyd's market.

• Investments in new exploration, expansion, or development of fossil fuel projects and related infrastructure should be ineligible for the matching adjustment and require capital holdings equal to 100% of the investment exposure to protect against the risk of assets becoming stranded.
• The UK government should mandate that insurers adopt credible transition plans aligned with a 1.5°C warming limit and embed these plans into their governance, risk management, and internal audit systems to ensure they are acted upon rather than just disclosed.
• The prudential regime should incorporate 'double materiality', requiring insurers to manage not only the material risks to their own businesses but also the impact of their investment and underwriting activities on society and the environment.
• HM Treasury should introduce formal Pillar 2 requirements in the PRA Rulebook for insurers to conduct long-term climate change scenario analysis, specifically utilizing scenarios from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).
• The Society of Lloyd's should be subject to express legal duties to support the UK's climate targets, protect nature and biodiversity, and publish an annually updated transition plan for the Lloyd's market to reach net-zero by 2050.

APA

ClientEarth (2022). HM Treasury Consultation on Review of Solvency II. https://www.clientearth.org/media/za4n0vh5/clientearth-response-to-hmt-solvency-ii-consultation-july-2022.pdf

Chicago

ClientEarth. HM Treasury Consultation on Review of Solvency II. 2022. https://www.clientearth.org/media/za4n0vh5/clientearth-response-to-hmt-solvency-ii-consultation-july-2022.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=HM Treasury Consultation on Review of Solvency II |date=July 2022 |url=https://www.clientearth.org/media/za4n0vh5/clientearth-response-to-hmt-solvency-ii-consultation-july-2022.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2022treasury, author = {{ClientEarth}}, title = {{HM Treasury Consultation on Review of Solvency II}}, publisher = {ClientEarth}, year = {2022}, month = jul, url = {https://www.clientearth.org/media/za4n0vh5/clientearth-response-to-hmt-solvency-ii-consultation-july-2022.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }