European Union’s insurance regulator has revealed that insurance companies could face climate stress tests as early as 2023.

Insurance companies are under pressure to stop underwriting fossil fuels and reduce exposure to investments that pose climate risk.

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Speaking at the Reuters Future of Insurance Europe conference the European Insurance and Occupational Pensions Authority (EIOPA) chairperson Petra Hielkema stated that the tests will take place by 2024 at the latest “it might be we want to do this one quicker”, Reuters has reported.

However, there is “no concrete planning” for 2023 tests yet, Hielkema said adding that tests for pension funds next year were also likely to be conducted on climate change parameters.

Meanwhile, Bank of England (BoE) executive director for insurance Anna Sweeney told the panel that results for BoE’s first climate stress tests for banks and insurers are due in the first quarter of 2022.

“We’ve had to ask for resubmissions from some firms where we have felt that there hasn’t been enough due diligence…or enough clarity,” Sweeney told the panel.

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Hielkema suggested that imposing a carbon tax was better than setting capital requirements to encourage insurers to deal with climate change.

Supporting the idea of carbon tax Zurich Insurance EMEA CEO Alison Martin said it was needed “as part of a suite of mechanisms to help us get to the transition”.

“We have nearly 70 different versions of carbon price mechanisms…there’s a challenge to get to something which is harmonised,” Martin noted.

Candriam head of insurance relations Marie Niemczyk told the panel that the “it (carbon tax) needs to be high enough to actually have a deterrent effect”.