The Prudential Regulation Authority (PRA) has published an updated supervisory statement setting out its expectations for how UK banks and insurers should manage climate-related risks, with a proportionate approach calibrated to firms’ material exposures. The statement replaces the PRA’s 2019 climate risk supervisory statement in full and consolidates prior PRA feedback alongside relevant international guidance. The expectations apply to UK banks, building societies and PRA-designated investment firms, and to UK insurance and reinsurance firms and groups (including Solvency II and non-Solvency II firms and the Society of Lloyd’s and managing agents), but not to UK branches of overseas entities. The statement explains how physical and transition risks, and potentially climate-related litigation risk, can transmit into firms’ financial and operational risk profiles, and sets out supervisory expectations across governance, risk management, climate scenario analysis, data and disclosures, with additional chapters on banking- and insurance-specific issues such as financial reporting and expected credit losses, capital and liquidity adequacy assessments, insurers’ ORSA expectations, and Solvency II capital and valuation considerations. Firms are expected to complete an internal review against the updated expectations within six months, by 3 June 2026, identifying gaps and producing a plan to address them. Supervisors will not request evidence of those internal reviews until at least after that six-month period has elapsed.
Prudential Regulation Authority 2025-12-03
Prudential Regulation Authority issues updated supervisory expectations for banks and insurers on managing climate-related risks
The Prudential Regulation Authority has issued an updated supervisory statement on climate‑related risk management by UK banks and insurers, replacing its 2019 statement and consolidating prior feedback and international guidance. The expectations apply to UK deposit‑takers, PRA‑designated investment firms and UK insurance and reinsurance entities, but not UK branches of overseas firms. They cover governance, risk management, climate scenario analysis, data and disclosures, plus banking‑ and insurance‑specific guidance on capital, liquidity, financial reporting, expected credit losses, Own Risk and Solvency Assessment and Solvency II valuation. Firms must complete an internal review against the updated expectations and develop remediation plans before supervisors seek evidence.