Climate and Insurance.org

Mandated “Climate Risk” Disclosure: Turning Professional Activists Into Insurance Inspectors

about the author: Robert Detlefsen, Ph.D., is Vice President of Public Policy for the National Association of Mutual Insurance Companies.

In a Legal Backgrounder published by the Washington Legal Foundation, Dr. Detlefsen examines the “Insurer Climate Risk Disclosure Survey” that was recently adopted by the National Association of Insurance Commissioners (NAIC). He evaluates the insurer climate risk disclosure mandate against the backdrop of traditional rationales for mandatory disclosure, and analyzes the NAIC’s survey's potential impact on insurers, their policyholders, and public policy. He argues that the survey serves few, if any, legitimate insurance regulatory objectives, and that its primary effect will be to impel insurers to take actions that may be detrimental to the interests of themselves, their customers, and the broader public interest.

Editor's Note: Editor’s Note: On March 17, 2009, the Executive Committee of the National Association of Insurance Commissioners (NAIC) adopted a mandatory requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks. If a state chooses, insurers with annual premiums of $500 million or more will be required to complete the climate risk disclosure survey every year, beginning on May 1, 2010. Insurers with annual premiums of $300 million or more would be required to respond to the survey in May 2011. The surveys are to be submitted in the state where the insurance company is domesticated. Other insurers in that state may be asked to answer the survey on a voluntary basis. There is ongoing discussion among the regulators about survey answers being posted on either state insurance department websites or on the NAIC website.

Click here to view the latest draft climate risk disclosure memorandum.

The NAIC White Paper Project: “Potential Insurance-Related Impacts of Climate Change on Insurance Regulators"

Editor’s Note: The NAIC Climate Change and Global Warming (EX) Task Force adopted its climate change white paper at the recent NAIC summer national meeting over the objections of industry trade representatives.

Click here to view the May 28, 2008 version of the white paper.

Charles M. Chamness, “Don’t Turn Insurers Into Environmental Traffic Cops,” National Underwriter, May 12, 2008. article

Scott Deatherage, “Xcel Energy Settlement with New York Attorney General Requires Greater Climate Risk Disclosure,” Law and the Environment blog, September 2, 2008. article

J. Wylie Donald and Grace Kuridan, “Insurance Coverage for Climate Change Disclosures: Are You in Good Hands?” The Corporate Governance Advisor, Vol. 15, No. 5, September/October 2007. article

Peter J. Gray, “The SEC is Getting Hot and Bothered over Climate Change,” The Metropolitan Corporate Counsel, Vol. 16, No. 1, January 2008. article

Evan MIlls, "From Risk to Opportunity: 2008 Insurer Responses to Climate Change," Ceres, April 2009. report

Thomas Mounteer, “The Furor Over Climate Change Disclosures," Financial Week, May 12, 2008. article

Thomas Mounteer, Kevin Welsh, Michael Lukens and Jeff Allmon, “Disclosing Effects of Climate Change in Energy, Financial Companies” 10-K’s,” BNA Daily Environment Report, Vol. 2008, No. 41, March 3, 2008. article

Rory Sullivan, “Climate Change Disclosure Standards and Initiatives: Have They Added Value for Investors?” Insight Investment, September 2006. article

Jeffrey A. Smith, “Disclosure of Climate Change Risk and Opportunities,” Review of Securities and Commodities Regulation, Vol. 41, No. l, January 2, 2008. article

“Torys on Developments in Climate Change Disclosure Requirements,” Torys Bulletin, February 28, 2008. bulletin