NAIC Climate Risk Survey Serves Activist Agenda, NAMIC Rep Says

Insurers are asked in the survey to answer eight questions designed, according to the survey draft, "to provide regulators, shareholders and the public with substantive information about the risks posed by climate change to insurers and the actions insurers are taking in response to their understanding of climate change risks."

Mr. Detlefsen argued in a paper published by the Washington Legal Foundation (WLF) that the NAIC's decision to make insurers' answers publicly available leaves carriers open to both condemnation by global warming activists and legal action by plaintiffs' attorneys.

The paper, titled "Mandated 'Climate Risk' Disclosure: Turning Professional Activists Into Insurance Inspectors," states class-action lawsuits may be filed under the theory that "an insurer's failure to incentivize its insureds to reduce their carbon footprints makes the insurer culpable for the harm allegedly caused by global warming."

The paper also said the survey questions ask insurers for information about their actions regarding a climate change risk that is not yet well-defined or understood by the science community.

Mr. Detlefsen said survey questions repeatedly mention the phrase "climate change risks," implying climate change "is a discrete risk, and that insurers are capable of predicting future loss costs caused by 'climate change-influenced events.'"

But he said recently published peer-reviewed research by climate scientists are inconclusive regarding the exact effects of climate change, with some studies noting that hurricane frequency may be reduced, rather than increased, as a result of global warming.

"Given the difficulty insurers face in trying to assess the impact of global warming on their business operations, it follows that they are in no position to 'encourage policyholders to reduce the losses caused by climate change-influenced events,' as contemplated by question six [in the NAIC survey]," Mr. Detlefsen said.

The paper concludes activist groups have a right to protest and boycott companies that do not follow their agenda. But Mr. Detlefsen said mandatory disclosure rules put in place by administrative agencies "should not be used for such ideological ends."

He called on individual state insurance departments, which have the authority to administer or ignore the survey, not to subject insurance companies to the questions.

Dave Snyder, vice president and associate general counsel of the American Insurance Association (AIA), disagreed with Mr. Detlefsen's major points, and he stressed that the climate survey is the result of a compromise reached between industry members, the NAIC and consumer groups.

States could have gone in dramatically different directions on climate risk disclosure, he noted, with some versions being much worse than the current survey.

He said the survey also provides an important opportunity for insurers to explain that they are concerned with issues such as climate change just like the public is, and they can also emphasize the positive steps they are taking on this issue.

For companies that are not comfortable taking actions based on the current science, they can reflect that in their answers, Mr. Snyder noted.

Regarding the opportunity for lawsuits, he said the current survey "went a long way toward eliminating litigation exposure" by no longer requiring companies to make unprotected forward-looking statements.