The adverse impact of climate change could pose material financial risks to impact the safety and soundness of financial institutions, including insurers, with broader implications on the stability of the financial system including their clients and hence, could affect the sustainability of domestic economic growth.

In view of the risks that climate change poses for financial stability in the long run, Bank Negara Malaysia (BNM) expects financial institutions including insurance companies to respond urgently, through taking early actions to implement changes towards building climate resilience and strategically, by accounting for how actions today affect future outcomes under a range of scenarios and time horizons over the long term comprehensively, when strengthening their risk management frameworks to address these financial risks from climate change. In particular, financial institutions are to manage these risks by recognizing the distinctive elements of climate-related risks: far-reaching in breadth and magnitude, foreseeable but highly complex due to uncertainty, nonlinearity, irreversibility and dependency on short-term actions; and holistically, through greater collaboration across a wider spectrum of stakeholders when managing the systemic impact of climate-related risks.

To address these ecosystemic and holistic implications, this program hopes to provide directors of insurance companies with a better understanding of the complex and inter-connected issues related to climate change and how implementation and adoption of BNM’s Climate Change Principles-based Taxonomy (CCPT), Climate Risk Management and Scenario Analysis (CRMSA) guidelines including stress testing (CRST) could help enhance the resilience of the financial sector against climate-related risks while the knowledge gained will help directors provide better strategic and tactical oversight of the management of  climate risks for their organizations.