State insurance regulators are assailing the Biden administration’s plan for collecting detailed information from insurance companies to analyze how climate change is affecting the cost and availability of property coverage.
The National Association of Insurance Commissioners warned that the Treasury Department’s analysis will probably yield “fallacious results in trying to identify climate risk.” The association, which represents state regulators, asked Treasury’s Federal Insurance Office to “reconsider its ill-advised approach.”
The criticism came in a pointed four-page letter submitted by the association when the federal insurance office sought feedback on its unprecedented effort to use insurer data on claims payments to assess the effect of climate change on insurance coverage across the country.
The Federal Insurance Office does not regulate insurers — state agencies do so — but its analysis could identify states and communities where property insurance markets are shaky and could collapse as climate change intensifies the damage from natural disasters.
The analysis responds to an executive order by President Joe Biden on climate risk that directs the office to assess the “potential for major disruptions” in insurance availability due to climate change.
The office announced in October that it plans to require 213 insurers to submit information about policies, claims, premiums and losses in each ZIP code in which they write property and casualty policies.
The information, to be collected starting next year, would help the office spot areas where insurance is expensive or unavailable and analyze the demographics of those communities and their vulnerability to a natural disaster.
But the association of state regulators said an analysis could be misleading because insurance costs and availability are influenced by factors unrelated to climate risk, such as building codes, construction costs and the local legal environment. Those factors “could be misinterpreted as climate risk,” the association wrote in its letter submitted on Nov. 22.
It added that while the information sought by the insurance office “can provide insight into affordability,” it “will not reflect the impact of climate risk on pricing or underwriting.”
The association is the first major insurance group to submit comments to the Federal Insurance Office, and its criticism could be influential because the group has taken its own steps to address the threat of climate change.
A new climate risk disclosure survey approved by the association in April requires many insurers to publicly disclose additional information about climate risks.
The Federal Insurance Office plans to collect information from every major national insurance company and from smaller insurers in 10 states most vulnerable to climate disasters. Those states are California, Florida, Illinois, Iowa, Louisiana, Missouri, New Jersey, North Carolina, Oklahoma and Texas.
by Yana Keller