The Bank of Englands Prudential Regulation Authority (PRA) has today published a consultation paper outlining how insurers should best manage the financial risks of climate change.
The paper suggests companies appoint a senior manager to assess "far-reaching and foreseeable" climate risks, arguing there should be "clear board-level engagement" on the issue.
It recommends that threats be addressed through firms' existing risk management frameworks, and scenario analysis be carried out to inform planning and overall business strategies.
The regulator also said firms should engage with the Task Force on Climate-related Financial Disclosures (TCFD), with this applying to all UK insurers, banks, building societies, and PRA-designated investment companies.
"Climate change presents financial risks that are relevant to the PRA's objectives of safety and soundness," it said. "While these risks may crystallise in full over longer-time horizons, they are becoming apparent now.
"Firms are enhancing their approaches to managing these risks, but more need to take a forward-looking, strategic approach if financial risks are to be minimised."
The PRA's consultation will end on 15 January 2019, with the regulator seeking responses that are proportionate to the nature, scale and complexity of businesses' operations.
This comes on the same day that the Financial Conduct Authority (FCA) published a paper exploring four areas it believes a "greater regulatory focus is warranted" in regards to climate change.
The regulator is seeking views on how to ensure pension funds consider climate risks when making investments, and the scope of a new disclosure requirement for financial services firms.
It also wants to ensure disclosures in capital markets give adequate information to investors on climate risks, and explore how best to boost competition and market growth for green finance.
"Climate change presents a disruptive and potentially irreversible threat to the planet," FCA chief executive, Andrew Bailey, said.
"The impact on financial markets is uncertain, but legal frameworks - at a global, European and UK level - have already begun to adapt to reflect a move to a low-carbon economy."
Stakeholders have until 31 January 2019 to give feedback on the FCA's discussion paper.
