play an important role, and there are independent cases for the reform of both. we have set out our main concerns with the existing ma framework, including in the recent discussion paper ( dp ) we published alongside hm treasury ’ s consultation document [ 7 ]. these can be broadly summarised as 1. the fundamental spread ( fs ) does not capture all retained risks and is generally low, 2. the fs is not sensitive to differences in risks between assets and 3. the fs does not adjust to shifts in the credit environment unless a default or downgrade has occurred. we have also expressed concern regarding the size of the risk margin, and its sensitivity to low interest rates. however, given the interaction between the ma and the risk margin on balance sheets, we cannot look at potential reforms in isolation. in order to maintain transfer values in line with observed prices, the calibration of changes have to be considered as a package. undertaken in isolation, a large cut to the risk margin would fail this simple test, and would increase the risk that an insurer ’ s liabilities could not be transferred to a third party if it were to fail. this would expose policyholders to an unacceptable risk and would be incompatible with the fundamental principles behind the solvency ii regime. but the detail of individual measures needs to be right too, to avoid perverse incentives which may lead to unintended consequences. when we started exploring reforms to the ma last year, stakeholders raised concerns about the potential for increased volatility in balance sheets. our interaction with firms has helped to develop our thinking. in our dp, we outlined a new, less volatile design for the credit risk premium ( crp ) component of the fs, and last week launched a targeted data collection exercise [ 8 ] to help understand the impact of that design, and various calibration choices that might be made within it. the aim is to achieve a valuation representing an accurate transfer value of matched portfolios of liabilities and credit assets, as well as the solvency capital requirement ( scr ) acting to absorb changes in those transfer values in a 1 - in - 200 stress over one year. this outcome is of the utmost importance for a tailored uk regime, given the nature of the products offered and the breadth of credit invested in by insurers. in the dp, we set out the pra ’ s current views about the overall calibration of the crp, including features such as

situation appears even more challenging than for climate change, and this calls for further action. another challenge is the fact that there is no single metric capturing the breath and width of biodiversity. the lack of a single metric has been prompting researchers to focus on specific aspects of nature. bundesbank researchers, for example, have been zooming in on the macroeconomic consequences of water stress events – a highly relevant phenomenon that is getting worse. 5 the bundesbank research focusses on water as a transport medium. waterways normally offer a cost - efficient way to transport goods. droughts, however, can seriously disrupt or even halt shipments and, in return, affect supply chains and hence prices and production. our researchers are now assessing the macroeconomic relevance of low water levels of the rhine, europe's most important waterway. looking at 30 years of data, they show that germany's overall producer price index – which encompasses thousands of product lines – tends to rise in the months with low rhine levels. their preliminary results are statistically and economically significant and hence relevant to inflation watchers. 4 conclusion let me sum up. climate change is a reality – so is the loss of biodiversity! they affect our economies, communities and lives. there will be no stable climate without a healthy natural world. central banks and supervisors hence need to consider both – climate change and biodiversity loss. that said, more research on the transmission channels of climate change and biodiversity loss is required. if central banks do not fully understand the channels through which climate change and biodiversity loss affect the real economy [ and thus their mandate ], they will find it hard to do their job properly. that is a key reason why the bundesbank is dedicating this year's conference to climate change and central banks – and is addressing nature - related risks. we aim to encourage networking and knowledge sharing between the academic community and central banks. it will help us to better understand each other's considerations and concerns and underpin the evidence - based foundations of the eurosystem's monetary policy. so, please make the most of the next two days. and enjoy the spring weather. 3 / 4 bis - central bankers'speeches 1spain bakes in summer - like heat, and worries about what comes next - the new york times ( nytimes. com ) 2 https : / / www. munichre. com / en / risks / natural - disasters. html 3 why the crisis engulfing nature matters for business and