The impact of climate change on the UK insurance sector - A Climate Change Adaptation Report by the Prudential Regulation Authority

Abstract - Climate change is a slow-moving process relative to many other public policy issues. Nonetheless, the future of the world’s climate system is likely to be heavily dependent on actions over the next few decades. Central banks across the globe are tasked with promoting monetary and financial stability and are quite used to thinking about the lags between policy action and effect. Through the Prudential Regulation Authority (PRA), the Bank of England has responsibility for regulation of insurance companies in the United Kingdom as part of its prudential regulatory responsibilities and alongside its monetary policy and financial stability remits. The PRA has two statutory objectives with regard to insurance: promoting the safety and soundness of insurance firms; and contributing to securing an appropriate degree of policyholder protection. Within the global financial architecture, insurance regulation is one area which needs to consider a relatively long time horizon. The PRA’s role as an insurance supervisor therefore brings challenges such as climate change much more clearly into focus and provides a natural starting point for the Bank’s work examining the impact of systemic environmental risks.