Insurer Group Concerned Over FIO Climate-Related Data Collection Effort

May 4, 2023 by

The National Association of Mutual Insurance Companies is airing concerns over what the group calls a “duplicative data call” issued by the Federal Insurance Office on climate change.

The concerns are being expressed by NAMIC as part of a bipartisan group of nearly 40 U.S. Senators in a letter sent this week to Treasury Secretary Janet Yellen.

FIO in 2022 proposed a data collection effort to determine what areas of insurance coverage were most suspectable to climate-related risks.

NAMIC and letter signatories state that the “broad array of highly detailed information” sought is using standards different from most other climate-related research into insurance.

Additionally, they fear this would pressure state regulators to adopt a “one-size-fits-all” policy from FIO rather than building on the work already done by states to mitigate the risks of climate change.

“FIO’s ‘go it alone’ approach to its data call threatens our efforts to understand climate change by ignoring the years of meaningful work by state regulators in cooperation with insurers,” Jimi Grande, senior vice president of federal and political affairs for NAMIC, said in a statement. “Understanding how climate change affects our policyholders and their communities is everyone’s job, and it must be a truly collaborative effort.”

NAMIC members write $357 billion in annual premiums and account for 69% of homeowners, 56% of the automobile, and 31% of the business insurance markets, according to the group.

Mitigation Costs

The cost of mitigating climate change will require “multiple socioeconomic-technological transitions,” including reducing energy demand, shifting to a more environmentally friendly food system, more progress on developing energy technologies and stimulating capital formation that is additionally imposed to the normal carbon pricing mechanism.

That’s according to a study out on Thursday in the journal Nature authored by a team of scientists from Japan.

One of the study’s goals was to address climate change mitigation cost, which is one of the biggest concerns in emissions reduction efforts. These costs are typically measured by gross domestic product.

The authors attempt to show the conditions required to reduce or eliminate climate change mitigation costs under a range of stringent carbon budgets covering global mean temperature increases of 1.5 to 2.0 °C.

They considered four major socioeconomic-technological transitions: lowering energy demand; technological progress in developing a greener energy-supply system; shifting to environmentally friendly food consumption, which includes low-meat diets and reducing food waste; stimulating capital formation.

“No single measure is sufficient to fully take away mitigation costs,” the study states. “These results indicate that cross-sectoral transformation is needed, as the realisation of all measures depends on effective government policies as well as uncertain social and technological changes.”

Banks and Insurers

Banks and insurers are more often adding coal exclusion policies to their investments while those with existing policies are toughening them, Reuters is reporting in an article on Insurance Journal.

Across the world, more than 200 financial institutions have policies restricting coal investment, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

Financial institutions’ coal exit policies were reviewed. The review included insurers and reinsurers, asset managers, pension funds, commercial banks and central banks.

The review showed that Asia had a large increase in the number of financial institutions barring coal, while European lenders and insurers are coming up with stricter policies than those in other regions.

Reuters reported that most financial institutions restrict investments in coal-fired power plants and thermal coal mining, however increasingly tougher restrictions target all financial services and products.

India

It will cost India $1.05 trillion to adapt its various industries to be compliant with climate change norms by 2030, a report from the nation’s central bank shows.

The Reserve Bank of India’s Report on Currency and Finance comes amid estimates that suggest that India’s green financing requirements could be at least 2.5% of the nation’s annual GDP address the infrastructure gap caused by climate events, Reuters reported this week.

Reuters is reporting that the bank is expected to establish a “disclosure framework on climate-related financial risks and guidance on climate scenario analysis and stress testing shortly.”

If no action is taken, India’s carbon dioxide emission levels may rise to 3.9 gigatonnes by 2030, up from 2.7 gigatonnes in 2021, the Reuters report states.

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