Climate Change Risk on "Radar" of Insurance Regulators

The U.S. National Association of Insurance Commissioners NAIC) has adopted a proposal requiring insurance companies to disclose to insurance regulators climate change-related financial risks as well as explain what actions the insurers' are taking to mitigate those risks.

Joel Ario, Pennsylvania Insurance Commissioner and chair of the NAIC Climate Change and Global Warming Task Force, says:

"Climate change will have huge impacts on the insurance industry and we need better information on how insurers are responding to the challenge. As regulators, we are concerned about how climate change will impact the financial health of the insurance sector and the availability and affordability of insurance for consumers. This disclosure standard will give regulators the information we need to better understand these risks."

In the future companies generating more than $500 million in annual premiums will be required to file an Insurer Climate Risk Disclosure Survey. The first reporting deadline is May 1, 2010.

Richard O. Faulk, who leads Gardere Wynne Sewell's climate change task force, writes in The Electricity Journal ("Lifting the Veil: Pressures Mount for Climate Change Disclosures," July 2009, p. 59) that the rule in effect enlists "the insurance industry as a 'partner' in the promotion, effecuation, and enforcement of global and national climate change policies."

Businesses simply cannot afford to look the other way when it comes to climate change-related pressures. They are facing up to this (however reluctantly) in the European Union and they better "get on the stick" everywhere else as well. In the U.S. insurance industry, the days of looking the other way are over. Period. Full stop.