Climate Change, Environmental, Social and Governance and Sustainability (2022-07-11)

Summary

This is a CIMA Supervisory Information Circular addressed to the insurance sector, alerting insurers to the growing importance of climate change and Environmental, Social and Governance (ESG) risk considerations. It explains that CIMA views climate-related risks — both physical risks (e.g. extreme weather) and transition risks (e.g. shifts to a low-carbon economy) — as material to insurers' underwriting, investment activities, financial stability and reputation.

The circular does not impose new binding rules or rule changes. Instead it signals CIMA's expectations and its own future plans.

• Governance: CIMA expects insurers' boards and governance structures to take climate and ESG risks into account in risk management and corporate governance frameworks.
• Investment monitoring: Insurers are expected to monitor environmental risk within investment portfolios.
• Data and disclosure: Insurers should consider data collection, risk modelling and disclosure practices.
• CIMA's own role: CIMA will continue engaging internationally and reviewing best practices to eventually develop a formal regulatory and supervisory approach to climate/ESG risk.

Because the circular is informational and awareness-raising rather than a rule or regulatory measure, it does not set out concrete compliance deadlines or mandatory filing requirements. Insurers are encouraged, but not formally required by this document, to strengthen governance and monitoring practices around climate and ESG risk in anticipation of future CIMA guidance.

Key obligations

• Insurers should ensure those charged with governance have clear roles and responsibilities for managing and mitigating climate and ESG risks
• Insurers should monitor environmental risks within their investment portfolios, including collecting and managing data needed for risk modelling
• Insurers should work toward establishing consistent transparency and disclosure practices regarding climate/ESG risk

Applies to

insurers