As in 20211, the United States National Association of Insurance Commissioners (“NAIC”), during its recent annual meetings, has again determined that one of the four regulatory priorities for 2022 is Climate Risk/Natural Catastrophes & Resiliency, stating that:
“NAIC members will aim to finalize enhanced disclosures of climate-related risk by insurers and its impact on the insurance sector, evaluate the resilience of insurers on both sides of the balance sheet, close the insurance protection gap for consumers, and promote the economic benefits of mitigation techniques and strategies. The NAIC will move forward with considering the establishment of a Center of Excellence on Catastrophe Modeling to further empower states in their risk analysis and mitigation efforts.”
The 2022 adopted charges for the NAIC’s Climate and Resiliency (EX) Task Force (“C&R TF”) are:
Consider appropriate climate risk disclosures within the insurance sector, including:
- Evaluation of the Climate Risk Disclosure Survey
- Evaluation of alignment with other sectors and international standards
Evaluate financial regulatory approaches to climate risk and resiliency in coordination with other relevant committees, task forces and working groups, such as the Financial Condition (E) Committee and the Financial Stability (EX) Task Force, including:
- Evaluation of the use of modeling by carriers and their reinsurers concerning climate risk
- Evaluation of how rating agencies incorporate climate risk into their analysis and governance
- Evaluation of the potential solvency impact of insurers’ exposures, including both underwriting and investments, to climate-related risks
- Evaluation and development of climate risk-related disclosure, stress-testing and scenario modeling
Consider innovative insurer solutions to climate risk and resiliency, including:
- Evaluation of how to apply technology and innovation to the mitigation of storm, wildfire, other climate risks and earthquake
- Evaluation of insurance product innovation directed at reducing, managing and mitigating climate risk, and closing protection gaps
Identify sustainability, resilience and mitigation issues and solutions related to the insurance industry.
Consider pre-disaster mitigation and resiliency and the role of state insurance regulators in resiliency.
The C&R TF has five workstreams:
- Pre-Disaster Mitigation
- Climate Risk Disclosure
At its upcoming February 28, 2022, meeting, the C&R TF will discuss proposed revisions to the Climate Risk Disclosure Survey.
1 See our February 16, 2021, Legal Update, “US NAIC Prioritizes Climate Risk and Resilience with a Focus on Related Disclosure.”