Climate Data Reporting Conflict At NAIC Confab

ORLANDO, FLA.–Insurance industry trade groups and advocates for expanded climate change data clashed yesterday at a session here examining proposals for reporting climate change's fiscal impact on insurers.

Their disparate views were voiced at a meeting of the Climate Change Task Force of the National Association of Insurance Commissioners.

Industry advocates argued that the disclosure being asked for was punitive and unanswerable, while groups seeking the information said any difficulties could be worked out and insurers needed prodding.

The session began with distribution of maps showing a 160-square-mile piece of ice shelf that has broken off Antarctica. “I think it shows a trend and we have a potential for a much larger collapse,” said Wisconsin Insurance Commissioner Sean Dilweg, who heads the task force.

Before he heard from speakers for both sides, Mr. Dilweg advised that the proposal up for discussion was “truly a draft” and comments would be received through April 15.

An NAIC white paper on the issue, which was revised just before the meeting, stated that it assumes global warming is occurring because there is “ample evidence.”

It said weather risk to insurer solvency is of universal concern for insurance regulators, “especially when considering insurer financial stability is heavily dependent on its investment portfolio.”

“So it is imperative we examine how climate change will impact the investments insurers hold and establish applicable regulatory standards for the investment practices of insurers.”

It went on to note that real estate is a portion of all investments held by insurers, and “many of these properties are located within coastal areas with increasing risk from climate change influenced weather perils.” Weather losses can impact asset value, fortification costs and cause business interruption, the white paper added.

Among other statements included in the paper, it said regulators need to know if insurers are adequately including climate in their risk assessment process and should ask about data collection, computer model use and policy formation.

They should also ask if and how insurers are providing incentives for policyholders to deal with their risks, if they are informing board members about climate risk, and if they are taking steps to mitigate their own risks, the paper said.

Bob Detlefsen, representing the National Association of Mutual Insurance Companies, said the paper was “somewhat presumptuous” in assuming insurers had certain knowledge with questions that had “a thinly disguised policy agenda.”

Asking what actions a company has taken, he said, implies a company “should have taken” action to assess financial impact, and asking about known trends from climate change impact on financials leaves open the question “known by whom.”

Frank Nutter, president of the Reinsurance Association of America, said the science to determine the risk is still very much an unknown and that questions concerning loss reserves for climate change ignore the fact that reserves are set after a loss occurs.

Regulators in seeking the data should “be careful what you wish for,” he said, because the material is likely to have a negative impact on insurance for coastal areas.

David Kodama, policy analyst director for Property Casualty Insurers Association of America, told regulators that insurers need guidance on the parameters involved and what is acceptable modeling. He questioned the state of the science and the ability of insurers to asses the risk and asked them to step back from their timetable for action.

David Snyder, American Insurance Association vice president and assistant general counsel, said insurers “care deeply about this issue” and mentioned that his industry is more and more involved with offering “green” projects and services. He said the climate issue would be better if it was part of the general disclosure in the management disclosure and analysis section of the insurers' annual filing.

The disclosures sought, he said, call for “utter speculation” that would be damaging to insurers, and the mandated information could do significant harm to insurers and provoke litigation from parties and businesses who feel they are improperly ranked as a climate risk by insurers. The disclosures, said Mr. Snyder, create more problems than they solve.

In response, Mr. Dilweg said that his aim was to create commonality in gathering data because individual states are ready to act on their own.

Birny Birnbaum with the Center for Economic Justice said regulators, unless the companies provide full information, cannot act to secure a proper industry response to climate change.

Stressing the need for full industry disclosures, he suggested that regulators and market forces would have prevented the bond insurance crisis if full details of carriers' more “opaque,” riskier activities had been revealed. The information should be public, according to Mr. Birnbaum, because if it is only given to regulators market discipline will not be exerted.

Andrew Logan, director of Ceres coalition of investors and environmentalists, said insurers had a poor record of disclosing climate impact information to the Securities & Exchange Commission and others who sought the data.

Voluntary disclosure by insurers, he said, has not been successful, and insurers have provided “precious little information.” He termed the proposal a very good start.

Larry Shapiro, representing the Rockefeller Family Fund, raised concerns about the fact that states would be seeking information individually. “Do you want to proceed piecemeal?” he asked.

Mr. Shapiro said regarding whether the answers to climate questions should be public, mandatory and under oath, “the answer should be yes.” He conceded, however, that “maybe the questions should be tweaked. That's where we should go.”