Insurance industry supports EU taxonomy law but believes more changes are needed: Insurance Europe

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Insurance industry supports EU taxonomy law but believes changes are needed to fulfil its green potential, at the same time, it has raised concerns regarding the current reporting demands for underwriting and investment.
Insurance Europe and the European Insurance CFO Forum have reiterated their support for the EU’s Taxonomy Regulation in a newly published position paper.
Having come into force in July 2020, the EU’s Taxonomy Regulation aims to create a common framework for classifying environmentally sustainable economic activities.
In its paper, the insurance industry recognises that the law is fostering investment towards delivering climate neutrality. At the same time, it raises several concerns on the current reporting demands for underwriting and investment that is ‘taxonomy-eligible’ – specifically covered in the scope of the regulation.
The industry has noted the limited coverage of insurers’ investment portfolios as the taxonomy currently covers only a small portion of them. This restricts the ability of insurers from providing a diversified portfolio that aligns with the taxonomy criteria, the paper highlighted.
Another limitation is the focus on green activities over transition investments as the emphasis on existing green activities ignores company transition plans.
The industry stated that recognising and supporting these transition investments are crucial for achieving net-zero.
The requirement to split premiums for climate-related risks is another limitation that results in very low KPI values, typically not exceeding 5% for primary insurers. This does not reflect the broader contribution of insurers to sustainability, experts noted.
It was also pointed out that insurers need to pool different risks together, such as climate risks with fire and theft risks for house insurance, for example.
Finally, another limitation that was highlighted is that there is a reporting challenge. Analysts noted that the draft guidance released in December 2023 by the European Commission came too late to be effectively integrated, leading to inconsistencies and confusion in the first mandatory reporting in 2024.
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