Climate Change, ESG, and Sustainability

As the frequency and severity of extreme weather events increase due to climate change, the Cayman Monetary Regulatory Authority International (the “Authority”), like many global regulators, acknowledges the growing significance of Climate Risk and Environmental, Social, and Governance (“ESG”) factors. These considerations highlight the need for sustainable practices within the financial sector. Insurers, being particularly vulnerable to both physical and transitional risks through underwriting and investment activities, face substantial challenges to their resilience and financial stability due to climate change.

Climate-related risks are critical for the insurance sector, impacting not only the insurability of policyholders’ assets but also affecting insurers' operations, investment strategies, and reputation. It is becoming increasingly important for insurers to incorporate climate and ESG risks into their risk management and corporate governance frameworks. Governance bodies within insurers must clearly define their roles and responsibilities when addressing and mitigating these risks.

These risks can lead to business disruptions, and by securing the necessary resources to manage them, insurers can minimize operational interruptions. While the Authority acknowledges that sustainable investing is rapidly becoming the fastest-growing strategy in the financial sector, insurers must remain vigilant in monitoring the environmental risks embedded in their investment portfolios. This includes gathering and managing the data necessary for risk modelling and ensuring consistent transparency and disclosure practices.

As part of its supervisory responsibilities, the Authority will continue to engage internationally, conduct reviews, and assess the available information, including best practices, with the aim of developing a regulatory and supervisory framework to address climate and ESG-related risks effectively. For further inquiries, please contact the Authority’s Insurance Supervision Division at [email protected].