Climate Change Called Critical Issue For Insurers, Policyholder

WASHINGTON--Climate change is a critical issue to insurance regulators because insurers and consumers "will be among the first to feel the effects" of it, Wisconsin Insurance Commissioner Sean Dilweg told a Senate committee yesterday.

Testifying for the National Association of Insurance Commissioners at a hearing held by the Senate Committee on Commerce, Science and Transportation, Mr. Dilweg said "the evolution of climate science is of keen interest to us as regulators, and is a key tool for the companies we regulate."

The hearing was on Climate Science: Empowering Our Response to Climate Change.

Mr. Dilweg noted that direct and indirect investments in real estate represent a portion of all assets held by insurers and "many of these properties are located within coastal areas with increasing risk from climate change influenced weather perils like hurricanes and flooding."

The commissioner said the NAIC has taken a forward-looking approach to developing assessment tools that identify the potential impact climate change has on insurers and how insurers are assessing those risks.

He outlined what the NAIC Climate Change and Global Warming Task Force is doing to deal with the issue, and also presented to the panel the Task Force's white paper, "The Potential Impact of Climate Change on Insurance Regulation."

He explained to the panel that the paper discusses the effects of climate change on insurance industry investment decisions, disclosures and underwriting practices.

Commissioner Dilweg told the panel the paper also stresses the need for improved mitigation programs and land-use policies that reflect the potential for climate change impact.

In addition, he said, insurance regulators, working together through the NAIC, have drafted an Insurance Climate Risk Disclosure Survey.

He did not mention that the effort has not been without opposition from insurers who have argued the NAIC's initial demand that they file the information as part of annual statements would be burdensome and require speculative statements that could result in legal action against companies.

Mr. Dilweg did mention that "given the infancy of this issue," the survey was kept to eight general reporting questions for insurers meeting certain premium thresholds.

He made a point of noting that "U.S. insurers lag in SEC [Securities and Exchange Commission] disclosure that relates to climate change. Only 15 percent of U.S. insurers surveyed discussed climate change in [SEC] 10K filings, compared to 100 percent of electric utilities and 78 percent of oil companies. There was also a poor response to the Carbon Disclosure Project where only 30 percent of U.S. insurers responded, compared to 70 percent in Europe and 62 percent in rest of world.

He called the survey a uniform tool developed to help regulators measure the impact of climate change on policyholders and insurer operations.

"We've taken some important first steps at the NAIC, but more can be done," Mr. Dilweg added.

"We are encouraged that the committee shares our common interest in having accurate, objective climate science to back up critical policy decisions," the commissioner said.