This supervisory statement (SS) is relevant to all UK insurance and reinsurance firms and groups, ie those within the scope of Solvency II including the Society of Lloyd’s and managing agents (‘Solvency II firms’) and non-Solvency II firms, (collectively referred to as ‘insurers’), banks, building societies, and Prudential Regulation Authority (PRA) designated investment firms (collectively referred to as ‘banks’). ‘Firms’ will be used to refer to both insurers and banks.


Climate change, and society’s response to it, present financial risks which are relevant to the PRA’s objectives. While the financial risks from climate change may crystallise in full over longer time horizons, they are also becoming apparent now.


The PRA’s reviews of current practice in the banking1 and insurance2 sectors have highlighted that, while firms are enhancing their approaches to managing the financial risks from climate change, few firms are taking a strategic approach that considers how actions today affect future financial risks.



Chapter 2 describes the two risk factors through which financial risks from climate change arise and the distinctive elements which, when considered together, present unique challenges and require a strategic approach.


Chapter 3 sets out the PRA’s expectations concerning this strategic approach, including how firms:

  1. (a) embed the consideration of the financial risks from climate change in their governance arrangements;
  2. (b) incorporate the financial risks from climate change into existing financial risk management practice;
  3. (c) use (long term) scenario analysis to inform strategy setting and risk assessment and identification; and
  4. (d) develop an approach to disclosure on the financial risks from climate change.


This SS should be read in conjunction with the materials included in Table 1.

Table 1: Materials to be read alongside SS3/19 ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’

Banks Insurers
The PRA’s approach to banking supervision3
The PRA’s approach to insurance supervision
Fundamental Rules 5 and 6 of the PRA Rulebook4 Fundamental Rules 5 and 6 of the PRA Rulebook
Governance and risk management
General Organisational Requirements, Internal Capital Adequacy Assessment, Risk Control, Allocation of Responsibilities, Market Risk 2.1 and Group Risk Systems 2.1 of the PRA Rulebook The Conditions Governing Business, Investments, Insurance – Allocation of Responsibilities, Insurance – Conduct Standards and Insurance – Senior Insurance Management Functions Parts of the PRA Rulebook for Solvency II firms
SS5/16 ‘Corporate Governance: Board responsibilities’5  Articles 258-262 and 269 of the Solvency II EU Delegated Regulation6
SS21/15 ‘Internal governance’7 SS4/18 ‘Financial management and planning by insurers’8
SS5/16 ‘Corporate Governance: Board responsibilities’ 
Scenario analysis
Internal Capital Adequacy Assessment Part of the PRA Rulebook Conditions Governing Business part of the PRA Rulebook
SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ 9 SS19/16 ‘Solvency II: ORSA’10
Article 431 and 435 of the Capital Requirements Regulation11 Article 295 of the Solvency II EU Delegated Regulation12
European Banking Authority (EBA) Guidelines on disclosure requirements under Part Eight of Regulation (EU) No 575/201313