Delegated Regulation (Solvency) on the inclusion of risks threatening sustainability in the administration and management of insurance and reinsurance companies 2021/1256

Commission Delegated Regulation (EU) 2021/1256 of 21 April 2021 amending Delegated Regulation (EU) 2015/35 as regards the inclusion of sustainability risks in the governance of insurance and reinsurance undertakings (Text with EEA relevance).

This regulation enters into force on the twentieth day after its publication in the Official Journal of the European Union. It applies from 2 August 2022.

Publication date

2. 8. 2021

This Regulation amends the existing Delegated Regulation (EU) 2015/35 with the objective incorporate risks threatening sustainability into the management and administration of insurance and reinsurance companies. The Regulation entered into force 20 days after publication in the Official Journal of the European Union and applies from 2 August 2022.

Main points of the regulation:

• It emphasizes the importance of the transition to a sustainable economy in accordance with the goals of the Paris Agreement and the European Green Deal.
• Defines "sustainability risk" such as an environmental, social or governance event that could negatively affect the value of the investment or liability.
• It requires insurance and reinsurance companies to take sustainability risks into account within its management and administration systems, including solvency assessment.
• It orders insurance companies that publish information on the impact on sustainability factors, to adapt their procedures and controls.
• It requires that remuneration policies take into account the incorporation of sustainability risks to the risk management system.
• Emphasizes that insurance and reinsurance companies should take sustainability risks into account when investing and their clients' sustainability preferences.
• ** Introduces new definitions** such as "sustainability factors" and "sustainability preferences" and refers to relevant EU regulations.
• Amends several articles of Delegated Regulation (EU) 2015/35, to explicitly include risks threatening sustainability.

Basically this regulation obliges insurance companies and reinsurance companies to take a proactive approach to risks threatening sustainability, both in their investment strategies and in overall management and administration.