Connecticut and Minnesota regulators have decided to join California, New York and Washington in requiring insurers to respond to a survey on climate change.
Additionally, California Insurance Commissioner Dave Jones says the survey has been expanded by requiring all companies writing more than $100 million in direct premiums to respond to the Climate Risk Survey, adopted in 2009 by the National Association of Insurance Commissioners (NAIC). The previous threshold was $300 million in direct premiums written.
Jones says the choice to expand the survey “will double the number of companies required to respond and will give insurance regulators, investors and policyholders a better picture of how insurers are responding to climate change.”
“It is important that we identify those climate-related factors that can affect the marketplace and in particular the availability and cost of insurance,” says Connecticut Insurance Commissioner Thomas B. Leonardi, in a statement. “These surveys give us another window into the industry's risk management practices as they relate to changing weather patterns.”
Leonardi says about 110 insurance companies meet the criteria of at least $100 million in direct premiums written.
The survey includes eight questions to be submitted to regulators by Aug. 30. Questions deal with carbon footprint reduction plans and risk management to deal with the changing environment, like the use of computer modeling and geographical areas at greatest risk. Survey results will be made available to the public.
Leonardi says the information obtained by the survey will also benefit insurance industry investors and reinsurers. He says the survey is “another opportunity for the industry to help us all chart a safer and more prepared approach for significant weather events to ultimately mitigate damage and reduce costs for the consumer.”
“Left to its own devices, the insurance industry is likely to be reactive, pulling back from high risk areas and harming consumers,” says Andrew Logan, insurance director at Ceres, an investor group active in pushing for stronger climate disclosure by the industry. “This action by insurance regulators will encourage insurers to be proactive, thinking through how they can work with at-risk consumers and communities to make them more resilient in the face of climate change.”
“2011 set a record for billion-dollar weather disasters, and 2012 was the second worst year in the history of the insurance industry (trailing only 2005, which included Hurricanes Katrina, Rita and Wilma). From an insurer perspective, climate change is here,” adds Logan.
The insurance industry has been less than enthusiastic.
“Not even within the power and utilities sector must companies comply with mandatory disclosures of their plans to combat climate change through its operations and investments,” says David Kodama, senior director of research and policy analysis for the Property Casualty Insurers Association of America. “Nonetheless, insurers have the utmost interest in accurately assessing the potential risk and impact of future weather and climate conditions. It is critical to understand though that climate risk is one among many important strategic risks for insurers. Broadly speaking, it is something that insurance companies consider and manage through its overall enterprise risk management, and not necessarily in isolation.
And read this column: NAIC's Climate Dogma Is Putting Insurers At Risk, by Robert Detlefson, vice president of public policy at the National Association of Mutual Insurance Companies.
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PC360-NU Cover story: Climate Change & Insurance: Existential Threat—or Extraordinary Opportunity?
Author Bryan Walsh of TIME recently talked with the CEO of Swiss Re Americas, J. Eric Smith, who says, “What keeps us up at night is climate change,” Smith said. “We see the long-term effect of climate change on society, and it really frightens us.”
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