European insurers should hold extra capital for fossil fuel assets, the bloc’s watchdog has recommended.
The European Insurance and Occupational Pensions Authority on Thursday split from its banking counterpart by calling for insurers to set aside extra capital to withstand potential losses from exposures to unsustainable assets due to their “high transition risks.”
Last year, the European Banking Authority said EU lenders should not face higher or lower capital charges for polluting or climate-friendly loans.
But EIOPA said in a report that insurers should be subject to what’s known as a “brown penalizing factor” to counteract potential losses as climate-unfriendly assets become less popular in a world moving towards net-zero emissions. The watchdog recommends the industry hold 17 percent extra in capital requirements for fossil fuel-related stocks and 40 percent extra for bonds.
