Consultation Paper - A Green Investment Discount for Life Insurer Capital Requirements

Overview

The purpose of this Consultation Paper is to elicit feedback on the scope, structure and design of a "Green Discount" for life insurer capital requirements.

The Commission is proposing to amend the Insurance Business (Solvency) Rules, 2015 to introduce a Green Discount. The Green Discount would reduce the capital requirement applicable to spread risk for the green fixed income assets of life insurers that chose to adopt it.

The intention behind this is to encourage green, sustainable investment by life insurers, as long-term investors, and thereby help promote positive environmental outcomes.

The Green Discount would be subject to measures, such as a hard limit in the capital requirement reduction due to the Green Discount, which should ensure policyholder interests are still protected.

Further details on the proposed amendments can be found in the Consultation Paper, and accompanying exposure draft of the amendments, which are provided below and on the Commission's website.

The Consultation Paper is a working document, and does not prejudice any final decision to be made by the Commission.

Why your views matter

In 2018 the Commission issued a Discussion Paper on green insurance. The paper considered how the Bailiwick could become a supportive jurisdiction for green insurance, and how the Commission might support the development of green insurance through regulatory change.

A consistent theme that was explored in the Discussion Paper was the suggestion by the Commission that regulators needed to do more to enable insurers to purchase green assets. Feedback received was broadly supportive of the development of green insurance, while cautioning that policyholders should not be exposed to unnecessary risk as a result of any proposed changes. The proposals made within this Consultation Paper have been developed with that feedback in mind.

The proposals in this Consultation Paper would directly affect long term insurance licensees and applicants. They may also be of interest to the wider green investment community, as well as consumers of green investment products.

Some of the issues and questions raised may also be of interest to general insurance licensees, industry bodies, insurance regulators, and the wider public.