The CBES explored the resilience of the UK financial system to the physical and transition risks associated with different climate pathways. The exercise used three scenarios of early, late and no additional action to explore the two key risks from climate change; the risks arising from the significant structural changes to the economy needed to achieve net-zero emissions – ‘transition risk’; and risks associated with the higher global temperatures likely to result from taking no further policy action – ‘physical risks’. 

This is the first time the Bank has tested both banks and insurers to capture interactions between them and understand the risk presented by climate change across the financial system.

Expertise in modelling climate-related risks is in its infancy, so this exercise was designed to support capacity building for the Bank, CBES participants and the broader financial sector. 

This session will cover the main learnings for the insurance sector.

Speakers: Stefan Claus, Jethro Green, and Giorgis Hadzilacos, Bank of England