Banks and insurers in the UK must now adhere to tighter climate risk regulations after the Bank of England updated its climate risk policy for the first time since 2019.
Climate change and the transition to a net-zero economy present a multitude of challenges to banks and insurers, including physical risks posed by specific weather events and longer-term shifts in climate and transition risks such as adoption of new technologies and market changes.
The new policy framework, published earlier this week and effective immediately, will require increased visibility of board-level accountability and direct oversight by senior managers.
Disclosures and reporting will now also need to provide more risk and opportunity information to investors in a standardized format that allows for better comparability across firms and markets.
Companies will have six months to complete an internal audit of their current position in relation to the new requirements, including an analysis of the work required to bridge any gaps in existing approaches.
The new expectations are proportional to firm size, with the Bank recognizing that basing them on business model or geography may place excessive burdens on smaller firms to comply.
In 2019, the Bank of England became the first prudential regulator to publish guidance for banks and insurers on adapting their policies and processes to mitigate climate risk.
A record £4.6 billion was paid out by British insurers during the first nine months of 2025, including almost £600 million on weather-related damages (up 21% year-on-year).
