b'TABLE OF CONTENTSthat policy should include: (1) the long-termintegrated for purposes of managing climate risks, financial interests of the insurer and how currentto report climate risk issues in a coordinated decisions impact future financial risks; (2) results ofmanner and to have the appropriate resources and scenario analysis and potential stress testing forexpertise to support their consideration of climate different time horizons; (3) uncertainty around therisk. The control functions should identify, measure, timing and channels through which climate risksmonitor and report on the insurers climate risks, may materialize; and (4) sensitivity of both sides ofassess the effectiveness of the insurers risk the balance sheet to changes in key climate riskmanagement and internal controls and determine drivers and external conditions. The NYDFS furtherwhether the insurers operations, business results notes that the impact of climate change on theand climate risk exposures are consistent with the insurers risk tolerance levels and limits can berisk appetite statement approved by the insurers reflected in existing risk factors. board. Further, insurers enterprise risk management functions must provide for the Identifying Material Considerations identification and measurement of risk under a Under the Guidance, over the next two to threesufficiently wide range of outcomes, using years, insurers should start specifying keytechniques that are appropriate to the nature, scale considerations that inform their assessment of theand complexity of the insurers risks, and must use materiality of climate risks for their businesses. Theyprospective solvency assessments, including should pay attention not only to internal factors,scenario analysis and stress testing. such as their business models, long-term strategies and overall risk profiles, but also to external factors,What To Do Nowsuch as the economic and political environment, theThe NYDFS expects insurers to make use of the different information needs of different users of theTCFD framework and other similar initiatives, disclosure and recent developments in risks andincluding the tools and case studies that they disclosure requirements. If an insurer deems climateprovide, in developing their approach to climate-risks to be immaterial, the insurer is expected torelated financial disclosures. With respect to disclose this assessment, along with the qualitativetiming, the NYDFS expects insurers to implement and quantitative basis for it. If an insurer deemsthe expectations in the Guidance relating to climate risks to be material, the insurer is expectedboard governance and to have specific plans in to disclose related figures, metrics and targets asplace relating to organizational structure by well as the methodologies, definitions and criteriaAugust 15, 2022. More complex expectations may used to make that determination.take longer to implement, but the NYDFS expects insurers to start working on them now.Integration of Control FunctionsThe NYDFS further emphasizes that it expects an insurers control functions, including risk management, information technology, compliance, internal audit and actuarial functions to be MAYER BROWN |89'