The regulator leading the National Association of InsuranceCommissioners' controversial effort to collect insurer climate riskdata said companies will be given lots of leeway in responding. Butcarrier groups–already leery about the possible exposures they'llface by participating–are also alarmed about how the survey mightbe implemented should a particular state not fully cooperate.

Pennsylvania Insurance Commissioner Joel Ario, who chairs theNAIC's Climate Change and Global Warming Task Force, addressed theissue last week during a Climate Risk Summit here.

At an earlier NAIC Task Force session, in remarks that hadsurprised insurance trade group representatives, he had said that,in pursuing data for NAIC's Climate Change Disclosure Survey, if anindividual state chooses not to administer the survey to adomiciled insurance group, regulators will seek the informationfrom one of their subsidiary companies in another state.

In response, David Kodama, director of policy analysis for theProperty Casualty Insurers Association of America, said thesituation seems to be one of regulators in one state not respectingthe decisions of colleagues in another.

Mr. Kodama compared it to a parent deciding whether theirchildren will participate in an activity, and then someone elsetrumps that decision and makes them participate anyway. He saidregulators should respect the decision if one regulator decides thesurvey is not appropriate for the insurers in their state.

Robert Detlefsen, vice president of public policy at theNational Association of Mutual Insurance Companies, echoed thosesentiments, stating that a regulator might not be making thedecision to not administer the survey simply because of lack ofresources at the insurance department. The regulator, he noted,might be philosophically opposed to the climate risk disclosuresurvey, adding that should be a decision respected by otherregulators in other states.

Mr. Detlefsen wondered if the NAIC would take it one stepfurther and administer the survey to the second company in a groupif it does not like how the regulator in the lead stateadministered the survey.

In his later remarks that seemed designed to mollify suchconcerns, Mr. Ario said the aim is simply to get all of therequired companies to answer the questions, then see what responsescompanies give and what comments are received in response.

He said he is not expecting insurers to answer the questions inany specific way, and commissioners want to give companies a lot offlexibility in how they respond.

"I'm sure we're going to get some people giving extremelydetailed answers trying to show everything they're doing," he said.Others, he added, may be doing more in the climate change arenathan they indicate on the survey but are nervous about putting itin the public record, "and then we may get some companies that aregiving a very cursory set of answers."

The NAIC will initially administer the disclosure survey toinsurer groups, where only the lead company–defined as the insurerwithin the group that reports the largest direct written premiumvolume–must submit the survey to its domestic regulator.

Only groups with $500 million in direct written premium in 2009will have to complete the survey for 2010. In 2011, the numberdrops to $300 million.

One industry association representative, reacting to Mr. Ario'searlier comments, said if the NAIC plans to look to the nextlargest insurer in the same group domiciled in a separate state ifthe regulator of a state containing a lead insurer chooses not toadminister the survey, he wondered whether the NAIC would use asimilar tactic to obtain the sort of answers the NAIC wants.

But Commissioner Ario said later that the NAIC is only lookingto make sure it gets responses–be they detailed or vague–from everyinsurer.

He added, though, that regulators could follow up if they havean interest in a company that answers the survey from a differentstate–particularly if there is a regulatory concern, such assolvency, with a survey answer. "All that kind of second-levelfollow up, that's part of the idea," Commissioner Ario said."There's a public record now and people can look at it."

He added that "once it's all out in the public arena, we willwelcome all of that kind of comment, but beyond simply trying tomake sure every company answers [the survey], we are not trying tocreate a threshold beyond, 'you are required to answer, and we hopeyou'll answer as best you can.'"

Regarding whether there will be more detailed requirements goingforward in the second year of the survey, Commissioner Ario said"there could be–that depends on what happens."

He said individuals or groups will read the survey answers,which will be made public, and commissioners will listen to theirrecommendations. "This is an area where we're not going to be shortof people advising us of what we should do," he said, "so we'lllisten to all of that carefully."

The NAIC is looking at climate risk in insurer internalrisk-assessment process, how they inform and provide incentives forpolicyholders to deal with climate risk, how insurer boards areinformed on climate risk, and what steps carriers are taking tomitigate their own and policyholders' climate risks.

NAIC's effort has drawn objections from industry representativesworried that answers could reveal proprietary information andprovoke policyholder lawsuits if insurers disclosed they were notwriting or were canceling coverage based on climate changeexposures.