California Commissioner Counters AGs, Other Commissioners over Climate Initiative

California Insurance Commissioner Dave Jones fired off a letter to the 12 oil state attorneys general and one governor from states like Texas and Oklahoma over threats to sue him if he did not stop his Climate Risk Carbon Initiative, which asks insurers to voluntarily divest from thermal coal investments and requiring that insurers publicly disclose their investments in coal, oil, gas and utilities.

“I am not deterred by your threats,” Jones’ letter last month to the governor and attorneys general states. “We will not stop asking insurance companies to consider climate related risks and in particular we will not stop our Climate Risk Carbon Initiative. Our Climate Risk Carbon Initiative is a sound regulatory endeavor that is grounded in financial risk analysis, consistent with the state-based system of insurance regulation. Sound regulation of the insurance industry includes consideration of climate related risks.”

Jones said one of his primary responsibilities includes making sure insurers are financially sound.

That responsibility, coupled with the volatility of carbon-based investments, is what Jones said led him to request insurers to publicly disclose investments that are at risk of becoming “stranded assets” as governments may increasingly restrict the use of fossil fuels, and consumers and businesses potentially move away from relying on fossil fuels.

Jones noted that the G-20 Financial Stability Board, the Prudential Regulatory Authority of the Bank of England, insurance regulators across the globe, and others have called for disclosure by insurers of climate-related risks.

Jones also came under attack from other state insurance commissioners over his initiative. Several insurance commissioners have called the initiative an “affront to sound insurance regulation.”

His wrote a letter to those commissioners, which states:

“While politically popular in your states, denying or ignoring climate change, its impacts and related risks, is contrary to the evidence based approach that lies at the core of our system of state based insurance regulation. The National Association of Insurance Commissioners in 2009 adopted a Climate Risk Disclosure Survey to be administered to insurers for this very reason — that it is important to recognize that there are risks associated with climate change and its impacts which insurers and insurance regulators should consider and address.”