Lawyers at DLA Piper say that new guidelines on climate-change risk for insurers and reinsurers are likely to require additional measures and resources from firms.

Earlier this month, the Central Bank launched a public consultation on its proposals to introduce guidance on climate-change risks for the sector.

The regulator said that the issue should no longer be seen as an ‘emerging risk’, and that the sector needed to take action now to assess and manage risks from climate change.

Consistency ‘critical’

In a note on the firm’s website, DLA Piper welcomed the proposed guidelines, saying that it was critical that there was consistency in understanding what was required of insurers.

The firm’s lawyers added that they hoped that the finalised version of the guidelines would be “wholly consistent” with those from the EU regulator, the European Insurance and Occupational Pensions Authority (EIOPA), on conducting assessments on the effects of climate change.

“The clearer and more consistent the guidance is for the industry, the lesser the compliance burden, and the faster changes can be made to help reduce the effects of climate change and the associated risks,” DLA Piper said.

‘Competence and capacity’

Its lawyers stated that companies’ boards would need to be seen to be actively engaged with the assessment and management of climate-change risk.

“The proposed guidelines therefore place a spotlight on the competence and capacity of boards to understand and assess the long-term risks and opportunities related to climate change,” they added.

The DLA Piper analysis said that, while the proposals did not introduce new requirements in relation to climate-change risks, the new processes, assessments, and obligations involved “may mark a considerable advance on a firm’s current approach”.

“The reality is that fulfilling the expectations of the Central Bank, as set out in the draft guidance, are likely to require firms to commit to additional measures and resources,” the lawyers said.