CSDDD adopted: what does this mean for insurers?

Recently, the European Parliament and the Council adopted the Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD applies to all insurers and reinsurers that fall under the Solvency II Directive and meet certain criteria.

These criteria are as follows (Article 2 of the CSDDD).

For EU companies

• employing more than 1,000 FTEs, including people working for the company outside the standard employment contracts) and have a net global turnover of more than €450 million (for two consecutive years) or
• be the ultimate mother of a group, who collectively meet the above criteria, or
• be a company or parent of a group that has franchised or licensed agreements in the EU and received royalties of more than €22.5 million where the group's net worldwide turnover (including royalties) exceeds €80 million (for two consecutive years).

For companies from outside the EU

• who have achieved more than €450 million in net turnover in the EU (for two consecutive years) or
• be the ultimate mother of a group that collectively meets the above criteria, or
• be a company or parent of a group that has entered into franchise agreements or licensing agreements in the EU for more than €22.5 million in royalties received in the EU, where the group's net turnover (including royalties) in the EU exceeds €80 million (for two consecutive years).

The scope of the CSDDD also includes regulated financial undertakings, regardless of their legal form, that meet the above requirements. These include (re)insurers that fall under the Solvency II Directive and most holding companies with (re)insurers (Art. 3(1)(a)(iii), CSDDD). The CSDDD therefore also applies to mutual and cooperative insurers above a certain size.

The obligations under the CSDDD for insurers are due diligence obligations (art. 5-7, CSDDD) for their own activities, activities of subsidiaries and the upstream part (recital 26, 61, CSDDD) of their value chain (art. 3(g), CSDDD). The CSDDD does not apply to their downstream activities. They must weigh up adverse impacts (art. 3(b) – (d), 8-12, CSDDD) and use their influence to make upstream companies more sustainable.

Climate transition plans

(Re)insurers must draw up climate transition plans (this also applies to Solvency II and the CSRD, but the requirements are formulated slightly differently). Anyone who meets the CSRD requirements also meets the CSDDD obligation. However, the climate transition plan must be evaluated every year (art. 22, CSDDD).

Phased introduction

The directive will be introduced in phases (art. 37, CSDDD). This means that the largest companies will be the first to comply with the rules.