Which non-life insurance products are compliant with the EU Taxonomy?

Non-life insurance can contribute to reducing physical climate risk According to the EU Taxonomy Annex developed by the TEG expert group, the following insurance products against climate-related hazards can contribute to reducing physical climate risk:

• offering standard non-life insurance products against climate-related hazards;
• offering multi-peril (yield) crop insurance against both annual yield variations in addition to extreme climate-related hazards;
• incentivising adaptation behaviour, for example where insurers would offer premium discounts for homeowners who take steps to protect their houses from wildfires;
• offering risk engineering expertise to their customers with proactive risk improvement action management programs or by sharing their expertise with new projects;
• using insurers’ data and knowledge in developing zoning and building code regulations, standards and construction requirements and local adaptation plans. Insurers often have good information on which areas are at high risk and which measures can lower risk. This information is often used in designing zoning, flood defences, building code regulations and prioritising related adaptation investments; developing innovative risk transfer mechanisms as part of broader risk management solutions to help under-insured or uninsured communities to meet the challenges of a changing climate (for example the Caribbean Catastrophe Risk Insurance Facility or the African Risk Capacity);
• requiring minimum building standards, or adherence to build-back-better principles, differentiated by risk level, as a standard element of insurance contracts; developing online tools or early warning methods to allow people to detect risks to property from floods, storms and other climate related hazards; helping improve natural catastrophe models for different climate-related hazards.

The prerequisite for the above mentioned insurance products being EU Taxonomy compliant activity are threefold:

(1) The climate-related hazards need to be temperature-related, wind-related, water-related or solid-mass-related.

(2) The associated physical climate risk occurs in damages and disruption to natural and built environment.

(3) The Do-No-Significant Harm (DNSH) principle is applied with at all times. That is, the non-life insurer (i.e. the primary insurance product provider) is required to validate that the activity and/or asset being insured is compliant with the relevant DNSH thresholds for the activity under cover.

Corporates with more than 500 staff, balance sheet of EUR 20 million and turnover of more than EUR 40 million need to comply with EU Taxonomy for Sustainable Finance starting from January 2022.

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