Treasury Department seeks public opinion on insurance sector and climate-related financial risks – Insurance

The deadline of November 15, 2021 is approaching for submitting comments to the Federal Insurance Office (OIF) of the Treasury Department on its Information request (RFI) seeking feedback on the future work of the FIO regarding the insurance sector and climate related financial risks. This work will initially cover three “climate-related priorities”: (1) identify problems or gaps in the regulation and supervision of insurers by states; (2) assess potential disruptions to insurance coverage in US markets particularly vulnerable to climate impacts and (3) strengthen MIF engagement on ways the sector can help meet national mitigation goals and adaptation to climate.

Overall, the RFI is soliciting comments on 19 questions to help inform the scope and potential outcomes of the three MIF climate-related priorities. Recognizing that “high-quality, reliable and consistent data” is necessary to effectively achieve these priorities, the RFI is also seeking feedback on the availability of climate-related data, including the types of data that the FIO could collect and publish for improve insurer risk assessments and public disclosures.

Responses can be submitted to regulations.gov. Examples of information requests:

• How should the FIO assess the efforts of insurers through their underwriting activities, holdings and business operations to achieve the United States’ climate goals, including achieving zero net emissions by 2050?
• What are the key factors for the insurance industry in developing standardized, comparable and consistent information on climate-related financial risks? What are the pros and cons of current proposals to standardize such disclosures (for example, the Working Group on Climate-Related Financial Disclosures or the National Association of Insurers’ Climate Risk Disclosure Data Survey? insurance commissioners)?
• What are the main structural issues that hamper the ability of insurance supervisors to assess and manage climate-related financial risks in the insurance industry (e.g. accounting frameworks, other standards)?
• What steps have insurers taken to integrate mitigation and resilience considerations into their business operations in response to the threat of increasing economic losses from climate-related disasters? To what extent, if any, are models (proprietary, open source or third party models) used in the underwriting process to take into account the impacts of climate change?

RFI responds to President Biden’s May 20 Executive Decree on Climate-Related Financial Risk– which led the first two of the aforementioned FIO climate-related priorities – and serves as a first step in FIO’s efforts to create an “insurance-specific axis in the Treasury’s broader climate work”. The FIO survey also marks the federal agency’s latest effort to assess and / or mitigate climate change risks for the sectors they monitor or regulate. These agency efforts range from the Federal Energy Regulatory Commission (FERC) proceeding on climate-related weather impacts on the nation’s electricity grid, to the Securities and Exchange Commission (SEC) demand in mandatory climate-related disclosures for public enterprises.¹

Given the primary jurisdiction of states over the insurance sector – the jurisdiction of the FIO is limited to a surveillance and information-gathering role – the RFI is unlikely to result in the types of sweeping federal action envisioned by the SEC. . Nonetheless, stakeholder comments could influence the FIO’s international engagement through its representation of the United States in the International Association of Insurance Supervisors, or help shape the FIO’s planned publication of ‘Recommendations on Insurance’. the individual actions that can be taken by various insurance industry stakeholders (such as regulators, insurers, and policyholders) to address climate-related financial risks and facilitate the U.S. insurance industry’s transition into the future more sustainable. ”Ultimately, these recommendations could subsequently influence state regulation and supervision of the insurance industry.

Footnote

1. We have written extensively on the SEC investigation and related SEC initiatives focusing on environmental, social and governance (ESG) issues, which can be found on our Speaking Sustainability blog.

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