Climate risk and financial stability

IVASS believes that preservation of the natural environment, sustainable finance, transition to a green economy, and resilience to natural disaster are key priorities in the pursuit of financial stability.

Two types of financial risks are usually associated with climate change: "physical" risk and "transition" risk. Physical risk occurs when natural phenomena, either acute or chronic, affect the ability to generate income or damage the structures and capital of households and businesses. The consequences can affect the financial system.

Transition risk, on the other hand, is associated with a (more or less) sudden devaluation of (productive and financial) assets of companies operating in sectors related to the exploitation of fossil sources.

IVASS monitors and analyses the possible repercussions of climate risk on the financial stability of the insurance sector in line with the pursuit of its strategic objectives regarding the strengthening of the tools for safeguarding financial stability and the role of insurance in reducing the protection gap and in the transition to a sustainable economy. To this end, it participates in tables and committees dealing with guidelines and regulatory interventions on the subject.