NAIC Says Insurers Can Limit Answers On Climate Survey

In response David Kodama for the Property Casualty Insurers Association of America (PCI) said the situation seems to be one of regulators in one state not respecting the decisions of another. He said regulators should respect the decision if one regulator decides the survey is not appropriate for the insurers in his or her state. Other trade group representatives also reacted unfavorably.

In his later remarks that seemed designed to mollify their concerns, Mr. Ario said the aim is simply to get all of the required companies to answer the questions and then see what responses companies give and what comments are received in response.

He said he is not expecting insurers to answer the questions in any specific way, and commissioners want to give companies a lot of flexibility in how they respond.

"I'm sure we're going to get some people giving extremely detailed answers trying to show everything they're doing," he said. Others, he added, may be doing more in the climate change arena than they indicate on the survey but are nervous about putting it in the public record, "and then we may get some companies that are giving a very cursory set of answers."

The NAIC will initially administer the disclosure survey to insurer groups, where only the lead company – defined as the insurer within the group that reports the largest direct written premium volume – must submit the survey to its domestic regulator.

Only groups with $500 million in direct written premium in 2009 will have to complete the survey for 2010. In 2011, the number drops to $300 million.

One industry association representative reacting to Mr. Ario's Tuesday comments, that if the regulator of a state containing a lead insurer chooses not to administer the survey, the NAIC would look to the next largest insurer in that group domiciled in a separate state, said he wondered whether the NAIC would use a similar tactic to obtain the sort of answers the NAIC wants.

But Commissioner Ario said yesterday that the NAIC is only looking to make sure it gets responses – be they detailed or vague – from every insurer.

He added, though, that regulators could follow up if they have an interest in a company that answers the survey from a different state, particularly if there is a regulatory concern, such as solvency, with a survey answer. "All that kind of second-level follow up – that's part of the idea," Commissioner Ario said. "There's a public record now and people can look at it."

He continued, "Once it's all out in the public arena, we will welcome all of that kind of comment, but beyond simply trying to make sure every company answers [the survey], we are not trying to create a threshold beyond, 'you are required to answer, and we hope you'll answer as best you can.'"

Regarding whether there will be more detailed requirements going forward in year two of the survey, Commissioner Ario said, "There could be. That depends on what happens."

He said people or groups will read the survey answers, which will be made public, and commissioners will listen to their recommendations. "This is an area where we're not going to be short of people advising us of what we should do," he said, "so we'll listen to all of that carefully."

The NAIC is looking at climate risk in insurers' internal risk-assessment process, how they inform and provide incentives for policyholders to deal with climate risk, how insurer boards are informed on climate risk, and what steps carriers are taking to mitigate their own and policyholders' climate risks.

Its effort has drawn objections from insurance representatives who have worried that answers could reveal proprietary information and provoke policyholder lawsuits.