Climate change and the Prudent Person Principle: The implications of climate change on PPP compliance

Climate change risk could have a significant, irreversible impact on all types of assets held by insurance companies, raising questions about their financial sustainability from a long-term perspective. The Solvency II Prudent Person Principle requires insurers to capture all risks arising from their investment portfolios—which would include climate risk. Climate change risk should be a key consideration in evidencing an insurer’s Prudent Person Principle compliance.