US Treasury Seeks Input on Its Climate Risk Work in Insurance Sector
The Federal Insurance Office (FIO) of the U.S. Department of the Treasury issued a request for information to solicit public input on its future work related to the insurance sector and climate-related financial risks. This request for information follows the May 20, 2021 Executive Order, which the U.S. President signed, on the mitigation of financial risks of climate change. The efforts of FIO will focus on three initial climate-related priorities related to insurance supervision and regulation, insurance markets, and insurance sector engagement. Additionally, FIO seeks input on how its data collection and dissemination authorities can best be used by FIO in support of these priorities as well as to monitor and assess the insurance sector and climate-related financial risks. The comment period closes on November 15, 2021.
FIO intends for its climate-related work to respond not only to the Executive Orders, but also to provide an insurance-specific focus within Treasury's broader climate work, including working with Treasury's Climate Hub. In particular, FIO intends to initially focus on the following three climate-related priorities:
- Insurance supervision and regulation. Maintaining the financial stability of the insurance sector will involve identifying and filling gaps (if any) in insurance supervision with a focus on assessing climate-related financial risks. This will include monitoring the integration of climate-related financial risks into insurance supervisory practices and regulatory frameworks as well as assessing whether sufficient data, methodologies, and tools exist to manage the solvency of insurers and to protect them against the long-term risk of climate change. To that end, FIO plans to assess supervisory practices and resources, including, but not limited to, examination policies and procedures, solvency assessment and techniques, data availability and integrity, public disclosures, modeling, and forward-looking assessments. FIO will consult with individual state insurance regulators and the National Association of Insurance Commissioners (NAIC) during its assessment of such supervisory practices and resources.
- Insurance markets and mitigation/resilience. FIO intends to examine the insurability of disasters that are produced or exacerbated by climate change, including wildfires, hurricanes, floods, wind damage, and extreme temperatures. FIO also intends to assess the availability and affordability of insurance coverage in high-risk areas, particularly for traditionally underserved communities and consumers, minorities, and low- and moderate-income persons. Beyond analyzing potential insurance market disruptions, FIO intends to look at solutions identifying best practices for mitigation that can then increase post-disaster resilience and solutions that can help ensure sufficient availability and affordability of insurance for consumers in light of increasing climate-related disaster risk. In addition, FIO will examine the role of insurers in supporting climate resilience in critical infrastructure as well as in supporting green investment initiatives.
- Insurance sector engagement. FIO plans to increase its engagement on climate-related issues and take a leadership role in analyzing how the insurance sector may help mitigate climate-related risks. Throughout this work, FIO will engage with stakeholders, including through this request for information. FIO will also engage with the insurance sector to assess how the sector may help achieve national climate-related goals, including mitigation, adaptation, and transition to a lower carbon economy. In addition, FIO plans to consider ways to address the lack of common methodology and standardization in measuring financed emissions, particularly those of non-public companies in which the insurance sector underwrites and invests.
Related Link: Federal Register Notice
Comment Due Date: November 15, 2021
Keywords: Americas, US, Insurance, Climate Change Risk, ESG, Data Collection, Disclosures, FIO, NAIC, US Treasury
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