The European Commission has adopted a series of delegated regulations that help to drive investors towards more sustainable economic activities. The measures are part of the European Green Deal. The adopted delegated regulations are part of a suite of sustainability measures adopted at the same time including the EU Taxonomy Climate Delegated Act and the Corporate Sustainability Reporting Directive.
The insurance-specific sustainability amendments to existing legislation relate to:
- The Solvency II Delegated Regulation (Delegated Regulation (EU) 2015/35) supplements the Solvency II Directive (2009/138/EC) with detailed requirements on capital and risk management, governance and reporting. The amending regulation (C(2021) 2628 final) introduces obligations for insurers to manage sustainability risks and ensure that sustainability issues are taken into account in the ‘prudent person principle’. Among the amendments are requirements to ensure that remuneration measures take into account the integration of sustainability risks in the risk management system.
- Two delegated regulations under the Insurance Distribution Directive ((EU) 2016/97 (IDD)) are amended to take into account sustainability requirements. Delegated Regulation (EU) 2017/2358 and Delegated Regulation (EU) 2017/2359. Amending regulation (C(2021) 2614 final) integrates sustainability factors into suitability assessments for insurance products and integrates sustainability risks into product oversight and governance requirements as well as into the rules on conflicts of interest.
Similar amendments to hard-wire sustainability objectives have been made to the Markets in Financial Instruments Directive (MiFID II), the Alternative Investment Fund Managers Directive (AIFMD) and UCITS II Directive.
The European Commission has published a Q&A page on the changes. The Commission states that:
“The amendments support the European Green Deal objectives by providing clear long-term incentives to direct financial flows toward green investments. They should further stimulate the interest of investors and encourage the financial services sector to invest in projects and activities with a positive environmental impact.”
The delegated regulations amending aspects of Solvency II and the IDD will come into force 20 days after publication in the Official Journal and will apply 12 months after the publication date (expected to be by autumn 2022).