Category: Climate insurance · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-10
The Bank of England climate stress test, formally the Climate Biennial Exploratory Scenario (CBES), was the United Kingdom’s first system-wide assessment of how UK banks and insurers would withstand climate change. Launched in June 2021, it covered seven major UK banks and the largest UK life and general insurers, with final results published on 24 May 2022.
Category: Climate insurance Also known as: CBES; Climate Biennial Exploratory Scenario; BoE CBES Established / Date: Launched June 2021; results 24 May 2022 Related concepts: PRA climate stress test, Climate stress test insurance, NGFS
The CBES was an “exploratory” rather than a “pass/fail” stress test, designed to inform regulators, firms and the wider market about climate risk exposure rather than to set capital charges. It applied three 30-year scenarios — Early Action, Late Action and No Additional Action — derived from NGFS Phase II pathways and overlaid with UK-specific physical hazard projections.[1]
The CBES tested seven banks (Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest, Santander UK and Standard Chartered) and the largest UK life and general insurers. Each firm projected balance-sheet impacts across credit risk, market risk, underwriting losses (insurance) and operational exposures, with a counterparty-level “deep dive” on around 50 key corporates per firm.
Results, published on 24 May 2022, indicated that climate change costs would erode firms’ profitability and that UK banks and insurers could manage projected losses, but that protection gaps in insurance might widen and that insurer climate-related claims could rise materially under the No Additional Action pathway.[1]
The CBES was initiated by the Bank of England’s Financial Policy Committee (FPC) at its March 2020 meeting, with methodology published in June 2021 and final results in May 2022.[1] It drew its supervisory authority from the Bank of England Act 1998 (FPC objectives) and the Financial Services and Markets Act 2000 (PRA objectives, ss.2B and 2C).
The CBES did not result in firm-specific capital add-ons. Its findings, however, feed into the PRA’s continuing SS 3/19 supervision, the Insurance Stress Test cycle and the FPC’s macroprudential analysis. It also informed the Bank of England’s contribution to the Network for Greening the Financial System (NGFS), of which it is a founding member from 12 December 2017.[2]
The CBES interacted with disclosure obligations under FCA Listing Rule LR 9.8.6R(8) (introduced by PS20/17, December 2020, extended by PS21/23, December 2021) and the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31).[3]
For the insurance participants, the CBES required projection of claims, premiums and investment losses under each pathway. General insurers focused on physical risks — windstorm, flood, subsidence and supply chain disruption — using UKCP18 climate projections and vendor catastrophe models. Life insurers focused on transition risk, particularly the revaluation of corporate bond and equity holdings under tightening climate policy.
The published results indicated that, under the No Additional Action pathway, annual UK general insurer claims could rise by around 50-70% by 2050, and that life insurer balance sheets faced material losses on carbon-intensive assets under both Early and Late Action pathways.[1] The CBES also highlighted insurance protection gaps, noting that some perils may become uninsurable on commercial terms without adaptation or public-private partnership solutions.
Lloyd’s participated through its largest managing agents and used the results to inform its market-wide ESG programme. The Association of British Insurers has subsequently engaged with HM Treasury on flood risk insurance and protection gap policy.
The CBES, though aimed at regulated firms, has follow-on effects for UK businesses. Insurers translate the lessons into underwriting appetite (flood and windstorm postcodes, transition-vulnerable sectors), pricing and capital. UK SMEs and corporates may see, over time, higher deductibles and tightening capacity in exposed segments, alongside greater appetite for adaptation-rewarding products such as parametric flood cover.
Boards of insurance buyers can use the CBES scenarios — freely available on the Bank of England and NGFS websites — to inform their own scenario analysis under s.414CB Companies Act 2006 and IFRS S2.
A UK marine insurer participating in the CBES projected a 35% increase in port-related claims by 2050 under the No Additional Action pathway, reflecting sea-level rise and storm surge. It used the result to redesign its property reinsurance treaty, narrow capacity for legacy ports without adaptation plans, and offer 5-10% premium reductions to insureds with verified flood resilience investments. The firm reported the methodology and outcome in its TCFD-aligned annual report.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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