Climate Change Heats up UK Insurance “Stress Test”

The Prudential Regulation Authority (the “PRA”) has launched its 2019 insurance stress test, which for the first time includes what the Bank of England named an “exploratory exercise” in relation to climate change. The exploratory scenario elaborated by the PRA is designed to “capture information about how different firms are exposed to difficult-to-assess risks” such as climate change. As part of this exploration, firms must consider the impact of three greenhouse emissions scenarios on their liabilities and assets valuations.