MNB Sustainability Recommendation to Insurers

The National Bank of Hungary (MNB) has issued a recommendation to Hungarian-based insurers on climate change and environmental risks and on how to integrate environmental sustainability considerations into their operations.

The recommendation is aimed at helping insurers to take environmental factors into account and to help them to make the transition to sustainable operations and prepare for changes in legislation, Norbert Holczinger, head of the MNB's Sustainable Finance Department, said at the central bank's seven-day meeting in Budapest on Wednesday.

Insurance market players are exposed to climate and environmental risks in a variety of ways, from drought insurance to liability insurance and investment revaluation, so the green turn is of paramount importance for them, he stressed.

The Recommendation expects insurers to ensure that their administrative, management and supervisory bodies can adequately assess climate and environmental risks by adapting their corporate governance systems. It is recommended that insurers should establish a department or appoint a responsible manager for climate change and environmental risk management and control.

The central bank expects insurers to develop internal guidelines to regulate how the assessment and monitoring of climate and environmental risks is integrated into the insurance process. They should also assess their exposure to climate change and environmental risks and take environmental risks into account when making investment decisions.

The supervisory recommendation on disclosure is that insurers disclose information and key data on climate change and environmental risks. They should also start preparing to comply with legislation on disclosures already announced but not yet in force.

Insurers will have to apply the Recommendation from January 1, 2025, and prepare an analysis and action plan in the first half of 2024 in response to the expectations set out in the Recommendation," the head of department said.