Insurance Commissioner Dave Jones Announces Multi-State Effort on Climate Risk Disclosure Survey
News: 2012 Press Release
Insurance Commissioner Dave Jones today announced that the California Department of Insurance (CDI) has joined with Washington State and New York to require insurers to respond to the Climate Risk Survey adopted in 2009 by the National Association of Insurance Commissioners (NAIC).
California was the only state to administer the survey in both 2009 and 2010, and has joined with the other states in order to continue the survey first established by the NAIC in 2009. California and the other two states joining this initiative will require all companies that write in excess of $300 million in direct written premium to respond to the climate change survey.
"The Survey data will provide regulators with substantive information about the risks to insurers posed by climate change," said Commissioner Jones. "The survey will also explore the actions insurers are taking in response to their understanding of climate change risks."
Robert H. Easton, Executive Deputy Superintendent for Insurance, New York State Department of Financial Services, said, "The essence of insurance is the analysis of risk. We are asking insurers to share their views of the risk of climate change so that we can be sure that the industry and regulators are appropriately prepared."
"We're seeing the same severe climate trends of recent years continue into 2012," said Washington State Insurance Commissioner Mike Kreidler. "Our job as regulators is to confirm that companies are adequately addressing the impact of climate change on their risk profiles and ensure that the public has access to insurance to cover these severe weather events. The data from this survey will give us a real time benchmark for how insurers are preparing for the impacts of climate change."
"Climate change will have major implications for the insurance industry, yet few insurance companies are identifying their potential exposure and strategies for dealing with it," said Andrew Logan, insurance program director at Ceres, an investor group that has been active in pushing for stronger climate disclosure by the industry. "This weak disclosure means that investors, regulators and consumers have been flying blind without a solid sense of whether the industry is taking the steps necessary to understand and respond to this profound issue. The leadership demonstrated by Commissioner Jones and his colleagues today will go a long way toward closing this information gap."
"Climate Change and its related (and often unpredictable) weather patterns, impact the long term cost of insurance to the public and the capital that insurers must maintain to meet those challenges. Insurers and regulators must meet these challenges head on," said David Zona, Senior Vice President & Chief Underwriting Officer, Fireman's Fund Insurance Company.
According to industry sources (AM Best newsletter), 2011 set a record for catastrophe losses for insurers. A significant portion of those losses were due to severe storms and flooding. Insurers in the United States saw claims from nearly 2,000 tornadoes, plus thousands of hail and high wind events. If the spring 2011 tornado and storm season were to be considered a single event, it would have cost $21.3 billion in insured losses, making it the fourth-costliest insured event in U.S. history, behind Hurricane Katrina ($47.6 billion), Hurricane Andrew ($25 billion), and the Sept. 11, 2001 terrorist attacks ($24 billion).
In 2011 crop insurers paid out a record $9.1 billion in claims on U.S. crop damage. That total could exceed $10 billion when all claims resulting from damage from drought, flooding, and freezing weather are tallied. The previous record was $8.7 billion in 2008. In fact, the cost of the federal program has more than doubled in a decade. These unprecedented losses should serve as a warning to insurers and regulators that climate change cannot be ignored.
"This multi-state effort will not only seek to strengthen this survey, but also to ensure the results of the survey continue to be made public," said Commissioner Jones. "The result should be that insurers can implement best practices, and members of the public can study the impact on consumers."
California and the other two states sponsoring this data collection will continue to work cooperatively with other NAIC member states and jurisdictions participating in the NAIC Climate Change and Global Warming Working Group to revise and improve the Survey and its application and to also consider revisions to the risk focused financial surveillance process.
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.