NAIC Eyes Warming Impact On Industry

The National Association of Insurance Commissioners has set up a task force to explore the long-term ramifications of global warming for the insurance industry.

The action came at the group's spring meeting earlier this month.

Tim Wagner, director of the Nebraska Insurance Department, will co-chair the panel that will examine how global warming will affect the availability and affordability of insurance and the financial health of insurance companies.

The task force will also consider actions necessary to enable state regulators and insurers to mitigate and otherwise respond to these problems.

Mr. Wagner said it has become increasingly obvious that the country is experiencing bigger and more destructive storms. “We're seeing all kinds of extreme weather in Great Plains states, including drought, tornadoes, brushfires and severe hailstorms,” he said.

Washington Commissioner Mike Kreidler said the task force that he will co-chair will look at whether insurers have adequately factored these occurrences into their financial and risk models.

According to a December 2005 study by the Boston-based Ceres investor coalition, U.S. insurers have seen a 15-fold increase in insured losses from catastrophic weather events in the past three decades.

Andrew Logan, insurance program director at Ceres, said the industry is threatened by the “perfect storm of rising weather losses, rising global temperatures and more Americans living in harm's way.”

At the same time, the NAIC is currently developing a proposal for a program to manage insured losses that arise from any natural mega-catastrophe on the scale of Hurricane Katrina or bigger.

The program, now in its infancy stage, would include some form of state and federal catastrophe fund back-up for insurers with incentives for efforts to protect against disasters and new efforts to ensure all homeowners have flood insurance.