As if insurance regulators don't already have enough on theirplates, the National Association of Insurance Commissioners hasofficially waded into the global climate change debate. So far, itsmost noteworthy contribution is to insist that there is no debate.More on that later; first, some background.

This year, states will begin administering an "Insurer ClimateRisk Disclosure Survey" drafted by the NAIC's Climate Change andGlobal Warming Task Force and unanimously adopted by the full NAIClast March.

Participation is mandatory in 2010 for every U.S.-domiciledinsurer group with premium over $500 million. Next year and everyyear thereafter, insurer groups with premium over $300 million arerequired to participate.

Survey responses are to be submitted to the domestic regulatorof the company within the group that has the largest direct premiumvolume, and each state will make company responses available to thepublic, with the companies identified by name.

In addition, the NAIC will collect responses from the states and"coordinate a user-friendly central access point for the surveydocument and insurer responses."

Predictions of catastrophic anthropogenic global warming are thesubject of the greatest scientific debate of our time. Among thequestions we are grappling with:

o How rapidly is global warming occurring?

o To what extent is it caused by human activity?

o What is its relationship to natural catastrophes such ashurricanes, droughts and floods?

o What economic trade-offs would be entailed by various actionsthat might be taken to prevent further warming?

It would no doubt be interesting to know if insurers areweighing these questions in the context of their businessoperations. An anonymous survey administered on a voluntary basiswould provide a useful insight into insurer perspectives on climatechange.

Suffice it to say that such a survey bears no resemblance to theone concocted by the NAIC. The Insurer Climate Risk DisclosureSurvey consists of eight groups of questions typified by queriessuch as, "Does the company have a climate change policy withrespect to risk management and investment? If yes, pleasesummarize. If no, how do you account for climate change in yourrisk management?"

In addition: "Has the company considered the impact of climatechange on its investment portfolio? Has it altered its investmentstrategy in response to these considerations?"

Some questions aren't even questions: "Describe your company'sprocess for identifying climate change-related risks and assessingthe degree that they could affect your business, includingfinancial implications." And: "Discuss steps, if any, the companyhas taken to engage key constituencies on the topic of climatechange."

The survey assumes that catastrophic anthropogenic warming is anincontrovertible fact–an assumption that was presaged by the taskforce's declaration in its 2008 white paper that "global warming isoccurring….We believe that there is ample evidence in support ofthis assumption in a variety of other reports and studies, so wehave decided not to focus on the scientific aspects of globalwarming."

With that, the task force summarily disposed of the complexdebate over the extent and consequences of anthropogenic globalwarming. What remains is to determine whether insurers accept thereceived wisdom about global warming, and whether they are takingappropriate "actions" and "steps" in response to the impendingcrisis.

As the NAIC explains in a prefatory note, the survey's intent is"to provide regulators, shareholders and the public withsubstantive information about…the actions insurers are taking inresponse to their understanding of climate change risks."

The NAIC's decision to ignore the debate in the scientificcommunity over catastrophic anthropogenic global warming could wellhave the perverse effect of encouraging insurers to overestimatethe potential risks associated with climate change, and tounderestimate the risk of basing important business decisions onquestionable theories and assumptions.

Suppose, for example, that an insurer subscribed to the"consensus" view that during the last century, the Earth's averagetemperature increased by .7 degrees Celsius, and that this increasewas due primarily to human activity. Suppose the insurer alsobelieved, consistent with the consensus view, that warming willcontinue and accelerate at five-times the previous rate.

That works out to an increase of 3.5 degrees Celsius over thenext 100 years–which is .35 degrees Celsius per decade and .035degrees Celsius per year. Even under this dire scenario, one couldquestion whether it makes sense for an insurance company to have anongoing "process for identifying climate change-related risks andassessing the degree that they could affect your business."

A more fundamental problem is that by relying on assumptionsderived from the "reports and studies" implicitly endorsed by theNAIC white paper, insurers run the risk that their actions inresponse to climate change will be based on faulty science.

If we have learned anything from the release last November ofthousands of e-mails containing correspondence among scientistsaffiliated with the University of East Anglia's Climate ResearchUnit, it is that insurers, regulators and anyone else with aserious interest in climate change cannot afford the luxury ofassuming the validity of a particular body of climate researchsimply because it is said to represent the reigning scientificconsensus.

The East Anglia e-mails show that a close-knit group of theworld's most influential climate scientists:

o Actively colluded to subvert the peer-review process (andthereby prevent the publication of research by scientists whodisagreed with the group's conclusions about global warming).

o Manufactured predetermined conclusions through the use ofcontrived analytic techniques.

o Discussed destroying data to avoid governmentfreedom-of-information requests.

Viewed collectively, the e-mails reveal a fractured scientificcommunity in which a group of scientists promoting what has become,through their efforts, the dominant climate-change paradigm are atwar with other scientists derisively labeled as "skeptics,""deniers" and "contrarians."

The insularity of this close-knit group–several of whom were keycontributors to the influential 2007 report of the United Nations'Intergovernmental Panel on Climate Change–had previously been notedin a 2006 report to Congress prepared by a committee ofstatisticians led by Dr. Eugene Wegman of George MasonUniversity.

The Wegman Report examined the body of research behind thewidely publicized "hockey stick" graph, which purported to show adramatic and unprecedented increase in average global temperatureduring the 20th century.

After discrediting the hockey stick graph, the report observedthat "authors in the area of paleoclimate studies are closelyconnected, and thus 'independent studies' may not be as independentas they might appear on the surface."

The report further noted "the isolation of the paleoclimatecommunity," concluding that "even though they rely heavily onstatistical methods, they do not seem to be interacting with thestatistical community."

When members of the paleoclimate community were asked to explainand defend their work, "the sharing of research materials, data andresults was haphazardly and grudgingly done."

The latest shoe to drop was the U.N.'s acknowledgement last weekthat the 2007 IPCC report greatly exaggerated the rate at whichHimalayan glaciers are melting. The errors were discovered byoutside experts who were not consulted by the IPCC. The U.N. isreportedly investigating how the bogus claim made its way into theIPCC report.

In light of the legitimate questions that these episodes raiseabout the integrity of contemporary climate science, one couldargue that it would be exceedingly risky for any insurance companyto make important business decisions based on an uncriticalacceptance of the dominant scientific paradigm on climatechange.

Put differently, there would appear to be considerable risk inan approach to assessing "climate risk" that blindly assumes thevalidity of any particular theory or set of beliefs aboutanthropogenic global warming.

Regulators could play a constructive role by encouraging opendiscussion of the climate change debate and its potential impact oninsurers and consumers. Instead, the NAIC has chosen to suppressdebate through the heavy-handed machinery of mandatory public"disclosure."

The survey's tendentious questions can only serve to promoteconformity and inhibit "contrarian" actions and responses. Wouldany company dare disclose it had "engaged key constituencies of thetopic of climate change" by, for example, lobbying Congress toinvestigate the East Anglia e-mail correspondence for evidence ofpossible fraud on the part of government-funded climatescientists?

Fortunately, the NAIC cannot compel states to administer itssurvey. As of this writing, a handful of states have hinted theymight decline to do so. Should that happen, PennsylvaniaCommissioner Joel Ario, who chairs the climate change task force,has prepared a remedy.

The task force recently announced on its Web site that if astate declines to administer the survey, insurer groups domiciledin that state would be required to comply should any other state inwhich the group does business require the filing of the survey.

This edict comes nine months after the NAIC voted to approve ajurisdictional protocol that confined authority for administeringthe survey to the domestic regulator of the insurer within thegroup that reports the largest premium volume.

The new protocol amounts to an abrogation of the originalunderstanding that was approved by the NAIC, and provides anopening for regulators who may be having second thoughts about thevotes they cast to adopt the survey. There's no better time tojettison an ill-conceived regulatory initiative than before ittakes effect.

Robert Detlefsen, Ph.D., is vice president ofPublic Policy at the National Association of Mutual InsuranceCompanies. He may be reached at [email protected].