Sustainability risk plans: what (re)insurers need to know as implementation approaches

Introduction
The introduction of sustainability risk plans (SRPs) into the Solvency II framework confirms that sustainability considerations and ESG risks are growing priorities for insurance regulators. With implementation due in January 2027, despite the absence of final technical standards, this article considers what (re)insurance firms will have to navigate to comply with the new requirements.

Sustainability under Solvency II: a rising priority

In its first iterations, Solvency II,[1] adopted in 2009 and implemented in 2016, did not expressly address sustainability risks. Rather, it required (re)insurers to identify and manage all material risks, which allowed sustainability risks to be captured only indirectly.

In 2019, driven by its Action Plan on Financing Sustainable Growth, the European Commission (the Commission) requested an opinion from the European Insurance and Occupational Pensions Authority (EIOPA) on the treatment of sustainability within the Solvency II framework. In its opinion, EIOPA indicated support for amending the Solvency II framework to address sustainability risks, resulting in the explicit integration of climate-related risks into the prudential regime.[2]

In 2021, the Commission introduced changes to a number of regulatory frameworks including Solvency II. These measures embedded sustainability considerations into existing processes such as governance, risk management, product oversight and suitability assessments. However, there was still no requirement for (re)insurers to maintain a specific plan in relation to sustainability considerations.[3]

The 2024 review of Solvency II marked a further change. One of the review’s central aims was to address emerging risks, including climate-related financial risks, and following the 2024 review, Article 44 of Solvency II was amended (the Amended Solvency II Directive)[4] to introduce a requirement for (re)insurers to develop SRPs.

SRPs at a glance

The goal of the SRP is to strengthen firms’ resilience by requiring (re)insurers to take a structured approach to the identification, assessment and management of sustainability risks, thereby safeguarding policyholder protection and overall financial stability.

In summary, Article 44(2)(b) of the Amended Solvency II Directive states:

SRPs should include quantifiable targets and processes to monitor and address the financial risks arising in the short, medium, and long term from sustainability factors, including those arising from transition risks.
Those targets and processes should consider the latest reports and measures prescribed by the European Scientific Advisory Board on Climate Change, in particular in relation to the achievement of the climate targets of the European Union.
Where the undertaking discloses information on sustainability matters in accordance with Directive 2013/34/EU (the Accounting Directive), the SRPs should be consistent with sustainability reporting under the Accounting Directive and should include actions with regard to the business and strategy of the (re)insurer that are consistent across both.
The targets, processes and actions to address sustainability risks included in the SRPs should be proportionate to the nature, scale, and complexity of the business model of the (re)insurer.

SRP Regulatory Technical Standards: Consultation and de-prioritisation

The amended Solvency II Directive mandates EIOPA to develop regulatory technical standards (RTS) specifying both the management of sustainability risks and the required content of SRPs.

In December 2024, EIOPA published a consultation on the proposal for RTS covering sustainability risk management and SRPs. These draft standards set out minimum expectations for identifying, measuring, managing and monitoring sustainability risks, as well as the required content of SRPs and related supervisory and disclosure expectations (the draft RTS).

The draft RTS are designed to operationalise the amended governance requirements under Article 44 of Solvency II and reduce the compliance burden on undertakings through a coherent and proportionate approach to sustainability risk management. In this regard, the draft RTS:

do not introduce a separate framework. SRPs are to be integrated into existing Solvency II processes, particularly the own risk and solvency assessment (ORSA)
align with (re)insurers’ broader sustainability and transition planning
aim to avoid duplication, for example by allowing reuse of disclosures prepared under the Corporate Sustainability Reporting Directive

According to the draft RTS, SRPs should, at a minimum, include:

governance arrangements and policies
a sustainability risk assessment consisting of a materiality assessment and a financial risk assessment
an explanation of the results of the sustainability risk assessment
scenario-based risk metrics across time horizons
quantifiable targets over short, medium and long term in line with a (re)insurer’s risk appetite and strategy
actions the (re)insurer must take to manage sustainability risks

However, in October 2025, as part of the European Union’s regulatory simplification drive, the Commission deprioritised a number of Level 2 measures, including the Draft RTS[5]. With the Level 1 legislation (i.e. the Amended Solvency II Directive) in relation to SRPs taking effect from 30 January 2027 and the Level 2 legislation (i.e. the draft RTS) de-prioritised, firms will not have the benefit of final technical standards prior to implementation in January 2027.[6]

In the absence of final RTS

At a recent industry event, the Central Bank of Ireland (the CBI) advised that, in the absence of final RTS, the most relevant sources of guidance are the draft RTS and the CBI’s existing Guidance for (Re)Insurance Undertakings on Climate Change Risk (the guidance). The CBI also commented that it plans to update its guidance to align with the draft Level 2 legislation.

For now, the CBI expects firms to comply with Level 1 requirements on a best endeavours basis.

The CBI expressed that it does not expect (re)insurers to submit standalone SRPs. Instead, firms may integrate SRPs into existing documentation, such as the ORSA, depending on their approach.

CBI’s Guidance for (Re)Insurance Undertakings on Climate Change Risk

The CBI’s guidance sets out supervisory expectations for integrating climate risk into governance and risk management under Solvency II.

The guidance includes overarching principles such as:

an iterative approach to embedding climate risk into governance and risk management frameworks
treating climate risk as a core risk, not an emerging one
applying a double materiality lens (i.e. the impact climate change has on a (re)insurers’ business, as well as the impact that the (re)insurers’ activities have on the climate)
using the ORSA as a central integration tool for climate change risk
assessing impacts across short, medium and long-term horizons
where (re)insurers rely on group frameworks, these must be appropriately adapted for the local entity

The guidance also emphasises board and senior management responsibility for oversight and integration into decision making to ensure that climate-related risks are appropriately understood, overseen and incorporated into strategic and risk management processes.

What is the current market practice?

Across the insurance sector, firms are already embedding sustainability risks within existing Solvency II frameworks, primarily through the ORSA. EIOPA monitoring indicates that most (re)insurers now assess climate risks, including through scenario analysis, and are increasingly linking these assessments to strategic decision making.[7].

In practice, SRPs should:

set out clear objectives and metrics
allocate responsibility at board and senior management level
define implementation measures that outline steps, timelines and resources for integrating sustainability risks across underwriting, investments and capital planning

Practical next steps

The absence of final RTS does not remove the obligation on (re)insurers to comply with Article 44 of the Amended Solvency II Directive. The supervisory expectation is clear that sustainability risk management should now form part of core prudential processes.

(Re)insurers who are already aligned with the CBI guidance are likely to be operating in a manner that is broadly consistent with the draft RTS.

In practice, (re)insurers should:

ensure sustainability risks are fully embedded within existing Solvency II frameworks, particularly the ORSA
align internal approaches with the draft RTS and the guidance
monitor for updates to the CBI’s guidance and adjust their frameworks accordingly

For further information in relation to these topics, please contact Stephen D’Ardis, Partner, Catherine Moloney, Solicitor, Erica Smith, Solicitor, or any other member of ALG’s Insurance & Reinsurance team.

Date published: 30 June 2026

[1] Directive 2009/138/EC

[2] Opinion on Sustainability within Solvency II - European Insurance and Occupational Pensions Authority

[4] Directive (EU) 2025/2

[5] De-prioritisation of Level 2 acts in financial services legislation - Finance

[6] Letter from the Commission to the ESAs on the de-prioritisation of Level 2 acts in financial services legislation

[7] EIOPA monitoring exercise marks progress in the integration of climate change considerations into insurers’ risk assessments - European Insurance and Occupational Pensions Authority