Fitch Ratings believes the UK’s latest supervisory climate stress test for banks and insurers is the world’s toughest and that some institutions’ capital ratios under the 30-year scenarios are likely to fall close to, or even below, the regulatory minimums.

In a statement, the ratings agency said: “The results, due to be published by the Bank of England on 24 May, should not trigger undue investor concern because they will not be used to set capital requirements. Instead, the BoE and the participants will use the results to assess vulnerabilities to climate risks, understand the challenges to their business models, and enhance their risk management of climate-related financial risks.”

It added: “The severe design of the BoE test brings forward the full climatic effects of each scenario as an instantaneous shock, which makes it likely that some insurers will breach their solvency ratios.

“In practice, we expect insurers to reprice their business and to steer their investment portfolios towards lower-risk sectors to reflect changing circumstances, and we believe they would be fairly resilient to the BoE scenarios if such management actions were taken into account.”

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