As climate change increasingly impacts the global economy, regulators are placing greater emphasis on how financial institutions manage and disclose climate-related risks. The Autorité des marchés financiers (AMF) published its guideline on Climate Risk Management in July 2024 (Guideline). The AMF recently proposed certain revisions to the Guideline in a draft released for public consultation in March 2025 (Draft Guideline). The Draft Guideline includes, among other revisions, proposed updates to the disclosure obligations of climate-related risks.
This article summarizes the key components of the Guideline, including certain proposed amendments in the Draft Guideline.
1. Governance expectations
The AMF emphasizes that insurers must ensure a clear governance structure to address climate-related risks. This includes defining the roles and responsibilities of the board of directors or branch management and senior management, ensuring that climate risks are integrated into strategic objectives, and aligning the company’s business plan and risk appetite with climate change considerations.
Board of directors: The AMF expects the board to actively monitor and integrate climate-related risks into governance frameworks and decision-making processes. They should also ensure that compensation policies for senior management account for climate-related factors.
Senior management: Senior leaders should establish climate risk policies, lead the integration of these risks into the company’s overall risk framework and assess the financial implications of climate risks across various business lines.
Transition plan: Insurers are required to develop a transition plan that aligns with their business strategy and risk appetite. This plan should guide the company’s actions in managing both physical and transition risks, with clear methods for assessing progress.
2. Integrated risk management expectations
The AMF highlights the need for a comprehensive, integrated approach to managing climate risks across all business lines. Insurers should ensure that climate risks, both physical and transition, are incorporated into the overall risk management framework.
Insurers must identify the roles of various business units in managing these risks, set up controls for assessing impacts and ensure timely updates to their risk management strategies. Integrating climate risk into decision-making processes will be crucial to maintaining an insurer’s financial stability and reputation in an increasingly climate-conscious marketplace.
3. Climate scenarios and stress testing
The AMF stresses the importance of using climate scenario analysis and stress testing to evaluate how climate change may impact the insurer’s risk profile and business strategy.
Insurers should conduct regular scenario analyses to test how different climate change scenarios, such as various extreme weather events, might affect their business. These analyses will inform decisions on capital adequacy and risk management, ensuring insurers are prepared for future uncertainties.
4. Capital and liquidity adequacy
Given the potential financial implications of climate-related risks, the AMF expects insurers to maintain adequate capital and liquidity buffers to cover these exposures.
Insurers will need to adapt their Own Risk and Solvency Assessment (ORSA) processes to account for climate risks. This includes incorporating these risks into capital adequacy assessments and ensuring that liquidity reserves can handle the financial impacts of climate-related events.
5. Fair treatment of clients
The AMF places great importance on the fair treatment of clients in light of climate-related risks. Insurers must consider how climate change affects the entire product life cycle, from design to underwriting and ensure that clients are adequately informed about potential risks.
Product design: The creation of products must align with the insurer’s risk appetite and be designed to address climate-related risks.
Underwriting process: Insurers should incorporate climate risks into their underwriting criteria and tailor offerings to meet the needs of clients, especially those in regions more affected by climate change.
Client disclosures: Insurers must ensure that clients are provided with clear, accurate and timely information regarding climate-related risks before and during the product offering process. This will help clients make informed decisions about the products they choose and their potential exposure to climate risks.
6. Climate-related financial disclosures
The AMF requires insurers to publicly disclose key elements of their climate risk management strategies, including their governance frameworks, risk assessments and stress test results. In particular, the Draft Guideline clarifies that Annex 1 of the Guideline summarizes the minimum expectations for climate-related financial information that should be publicly disclosed, on a consolidated basis, by the financial institution.
Insurers must disclose targets related to greenhouse gas emissions, energy consumption and other relevant environmental factors. These disclosures should provide details about whether targets are absolute or intensity-based, the time frames for achieving them and the key performance indicators used to assess progress.
Moreover, insurers must assess their disclosures based on the size and complexity of the institution, which will determine the timing and level of detail required for disclosure. Where commercially sensitive information is omitted from disclosure, the Draft Guideline suggests that the institution should specify the items it has not disclosed and the corresponding rationale.
Annex 1 contains a number of proposed updates, including revising the deadline for disclosure of the institutions’ Scope 3 absolute gross GHG emissions to align with the deadline in OSFI Guideline B-15: Climate Risk Management.
Moving toward a more climate-resilient insurance sector
The Guideline is a significant step toward ensuring that the insurance industry is prepared for the risks posed by climate change.
As the final version of the Guideline is being finalized, insurers should continue to align their operations with these expectations to ensure compliance. The Draft Guideline is currently open for consultation, and insurers, along with other stakeholders, are encouraged to submit comments or feedback before the consultation period ends on March 17, 2025. Following the completion of the consultation period, the final guideline is scheduled to take effect on March 31, 2025. Dentons Canada’s Corporate & Regulatory Insurance Team interacts with the regulators who oversee the insurance industry to help you anticipate the positions they will take and the issues that are forthcoming. If you would like assistance preparing your submission in response to the Draft Guideline, please reach out to the authors, Marisa Coggin, Nathalie Durocher or Taschina Ashmeade or a member of the Insurance team.
