State Regulators Need to Improve ‘Fragmented’ Efforts to Assess Insurers’ Climate Risks: FIO
The Federal Insurance Office (FIO) has released a new report analyzing climate-related issues and gaps in U.S. insurance supervision and regulation, saying state regulatory efforts are fragmented and limited.
FIO, part of the U.S. Department of the Treasury and formed in 2010 as part of the Dodd-Frank Act, said it concluded that there are “nascent and important efforts to incorporate climate-related risks into state insurance regulation and supervision” and while giving credit to the National Association of Insurance Commissioners (NAIC), the office “encourages state insurance regulators to build on their progress.”
Efforts to include climate-related risks in insurance regulation and supervision “should be deepened and broadened so that it is both more fully integrated into oversight of insurers and adopted by more state insurance regulators,” said Secretary of the Treasury Janet L. Yellen, in a statement.
NAIC did not respond to a request for comment.
The report, Insurance Supervision and Regulation of Climate-Related Risks, makes 20 policy recommendations on improving supervision of climate-related risks, including that the NAIC state insurance regulators “provide guidance on and encourage insurers to implement climate risk monitoring, and to report to regulators, in a uniform manner, on the impact of climate-related risks on their strategic processes.” The report furthermore includes recommendations related to data collection, financial analysis, insurer solvency, surplus markets, consumer education, litigation risks, and investment risks.
The report, said the FIO, is a continuation of its efforts to understand climate-related risk in the insurance industry. The FIO in October proposed a data collection effort from homeowners insurers on historical and current underwriting data at a ZIP Code level.
The NAIC followed a call for public comment with a letter expressing its “deep concern” over the data-collection proposal, and its disappointment that insurance commissioners had not been included. At the time, NAIC said FIO “failed to demonstrate a good faith effort to engage with state regulators and has exhibited their intention to forgo a collaborative effort to identify and collect accurate and useful data.”