NAIC Climate Risk Disclosure Survey Responses of Insurers Coming Into Sharper Focus

In 2010, the NAIC adopted the Insurer Climate Risk Disclosure Survey (Survey) “for state insurance regulators, investors, and consumers to identify trends, vulnerabilities, and best practices by collecting information about how companies assess and manage climate risk.” The Survey’s eight questions are intended to address topics such as “climate risk governance, climate risk management, modeling and analytics, stakeholder engagement and greenhouse gas management.”

Since 2013, insurers reporting over $100 million in premium and licensed in California, Connecticut, Minnesota, New Mexico, New York or Washington State were required to respond to the Survey. This year, the list of states requiring Survey responses has grown and now includes the District of Columbia, Delaware, Maine, Maryland, Massachusetts, Oregon, Pennsylvania, Rhode Island and Vermont. It has been suggested that this increased participation has caused overall insurance company participation to increase from roughly 70% to 80%, meaning that only about 20% of U.S. licensed insurers are not presently required to respond to the Survey.

For those companies who are new to the Survey this year, the California Department of Insurance collects, and makes publicly available, company responses to the Survey. For all companies, interest in climate disclosures from both regulators and the public is likely at an all-time high and company responses to the Survey had already been increasing in detail over time.

The New York Department of Financial Services (NYDFS), for example, recently stepped up its focus. In July, NYDFS published a report analyzing over 120 responses to the Survey, rated responses in one of four categories (“Yet to Start,” “Early Stage,” “Making Progress” or “Good Progress”) and offered examples of what NYDFS viewed as “good practices” in connection with the Survey topics. This report demonstrates the emphasis that NYDFS is putting into climate disclosures, and follows NYDFS previously announcing that it would integrate climate risk considerations into its examination process.

Discussion of the Survey over the past year has been robust and will continue. The Disclosure Workstream of the NAIC’s Climate and Resiliency (EX) Task Force has been tasked with considering “modifications to the Climate Risk Disclosure [Survey] to align with Task Force on Climate-related Financial Disclosures (TCFD) and promote uniformity in reporting requirements.” The Federal Insurance Office’s recent Request for Information also seeks feedback on both the Survey and TCFD. With climate risk generally in sharp focus of the United Nations, the Biden administration, Treasury, and the Securities and Exchange Commission, to name only a few, the only current certainty is that climate risk disclosures made by insurers should be carefully considered and crafted.