Craig Swan, CEO, BMA
16 March 2023Analysis

BMA issues climate change guidance note for commercial insurers

The Bermuda Monetary Authority (BMA) has issued a guidance note by its insurance department on the management of climate change risks for commercial insurers.

The BMA said that climate risk is a global issue, and it is far-reaching in impacting the physical and macroeconomic environments in which insurers operate. Given the latitude of their implications and long-term nature, climate-related risks can become a significant financial risk to insurers and, as a result, the underlying stability of the financial sector.

Therefore, robust management of climate risk is crucial to ensuring and maintaining the financial soundness and ongoing viability of the insurance sector in general, as well as insurers’ abilities to contribute to an orderly transition to a net zero economy. The BMA is of the view that a comprehensive, long-term risk management approach sets the ground for insurers’ capabilities to offer solutions that support climate risk mitigation and adaptation, which gives insurers a key role in closing protection gaps.

While climate risk impacts the entire insurance market, the BMA’s guidance note outlines the Authority’s expectations for commercial insurers and insurance groups regarding their management and reporting of climate change risks.

Specifically, the guidance focuses on corporate governance and risk management practices for climate risk.

The guidance note is available on the BMA’s website.