The National Association of Insurance Commissioners (NAIC) this week adopted a mandatory requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks.
All insurance companies with annual premiums of $500 million or more
will be required to complete an Insurer Climate Risk Disclosure Survey
every year, with an initial reporting deadline of May 1, 2010. The
surveys must be submitted in the state where the insurance company is
domesticated.
"Climate change will have huge impacts on the insurance industry and we need better information on how insurers are responding to the challenge,” said Pennsylvania Insurance Commissioner Joel Ario, who chairs the NAIC Climate Change and Global Warming Task Force. “As regulators, we are concerned about how climate change will impact the financial health of the insurance sector and the availability and affordability of insurance for consumers. This disclosure standard will give regulators the information we need to better understand these risks.”
The scope of issues covered by the new disclosure requirement is broad, reflecting the many ways in which climate change will impact the insurance industry. In addition to reporting on how they are altering their risk-management and catastrophe-risk modeling in light of the challenges posed by climate change, insurers will also need to report on steps they are taking to engage and educate policymakers and policyholders on the risks of climate change, as well as whether and how they are changing their investment strategies.
Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories.
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