Climate and Insurance.org | takefive with Mike Kreidler and L. Tim Wagner

Mike Kreidler was first elected Washington State Insurance Commissioner in 2000 and was re-elected in 2004. He has spent more 25 years in various public service roles, including 16 years as a Washington state legislator, a Member of Congress and a regional director for the U.S. Department of Health and Human Services. Kreidler holds a Doctor of Optometry degree from Pacific University in Oregon and a master’s degree in public health from UCLA. Kreidler is a retired Lieutenant Colonel with 25 years of active and U.S. Army reserve service.

L. Tim Wagner was first appointed by Gov. Mike Johanns as director of the Nebraska Department of Insurance in January 1999 and was reappointed by Gov. Dave Heineman. Wagner began his insurance career in 1963 as an underwriter and held a number of different positions with several companies before being appointed the director of insurance. Wagner holds a bachelor’s degree in history, political science and business from Nebraska Wesleyan University.

Takefive:
Commissioner Kreidler and Director Wagner, at the NAIC’s winter national meeting in December, the Climate Change and Global Warming (EX) Task Force that you co-chair adopted its charges for 2007. One charge is to prepare a report that looks at the implications of climate change on various lines of insurance, and “the availability and affordability of insurance coverages for the insurance consumer.” Can you briefly describe how this report is being put together and when do you expect to release it?

Director Wagner:
We have appointed a drafting group to develop the report. Drafters include Commissioner Kreidler, Chris Carlson of his staff, Eric Dunning of my staff, Clare Stapleton Concord of the Wisconsin Insurance Department and Eric Nordman of the NAIC. We have held two hearings to gather factual information to inform the drafting of the report. We started with an overview which was released at the NAIC’s 2007 Spring National Meeting. The drafting is going a little slower than anticipated. This is in large part due to some technical difficulties with the transcript of the hearing held in December 2006. While our charge optimistically says that we will be done with the report in June 2007, I think it is much more likely that it will be distributed for public comment in September 2007 and completed in December 2007.

Takefive:
One portion of the charge states that the report “shall document what is learned with regard to insurers’ knowledge of potential climate change impacts on their business and financial condition and on efforts by insurers to respond to identified concerns.” The Task Force already has heard from a number of individuals and companies at two public hearings, but is there still an opportunity for individuals and insurers to correspond with the Task Force?

Commissioner Kreidler:
While we have held two hearings, this issue is so important to the public, insurers and insurance regulators, we plan to continue to gather the latest information available. I would encourage anyone interested in the topic to send their comments to Eric Nordman at the NAIC. His e-mail address is enordman@naic.org. He will make sure that they are distributed to all the drafters. We also are interested in hearing from people during the NAIC’s quarterly national meetings.

Takefive:
The Task Force charge says the report will make recommendations with regard to steps “that regulators need to take to assure that they are adequately monitoring insurers' activities with regard to managing the financial condition of insurance and the performance of insurance markets to the benefit of the nation's insurance consumers.” Do you care to speculate at this point on what some of those recommendations might be?

Commissioner Kreidler:
There are so many facets to climate change that must be explored that it is difficult for me to tell you what they all are before our study is complete. There are some that we know will be important so I will touch on those. I believe that the asset side of insurance regulation will be affected by climate change. Insurers have many opportunities to invest and where they place those investments will affect the returns they receive on them. This offers some challenges and some opportunities for insurers. Insurer investments can make a difference with regard to climate change. It is incumbent on insurance regulators to learn about these investments and encourage insurers to invest in equities that are both green and profitable.

On the liabilities side, insurers can also encourage builders to build dwellings and commercial buildings in ways that mitigate catastrophe losses. There has been much study and testing done on making buildings hurricane and earthquake resistant. Insurers have opportunities to influence construction decisions by rewarding or penalizing certain behavior through the rating system. Regulators might encourage insurers to take steps to reward building owners that have been thoughtful about the hazards they face when making decisions on the type of buildings they choose to build.

In addition, regulators will want to know what type of disaster recovery and contingency plans insurers have in place. Regulators will be looking to assess whether an insurer has adequately considered climate change consequences in its contingency and disaster recovery planning.

Availability and affordability concerns must also be considered. Although regulators understand that risk-based pricing is necessary, there are times when availability of affordable insurance products is lacking. Legislators, regulators, insurers and others must work together to ensure that a healthy competitive marketplace exists and that the public’s demand for affordable insurance products is being met.

Takefive:
A second Task Force charge is “to evaluate information collected in the Annual Statement regarding how insurers manage catastrophe risk, contained in either an interrogatory or in a management discussion, and make recommendations for possible improvements.” If the Task Force decides to seek additional information, how much time will insurers likely be given to implement any changes to their Annual Statements?

Director Wagner:
The Annual Statement would be a convenient way for regulators to collect additional information from insurers. If additional interrogatories are to be considered, the Task Force would abide by the timelines established for changes to the annual statement blanks. The information would be gathered on a prospective basis with insurers being provided ample notice of what information is required so that they can adequately prepare to submit timely and accurate data.

Takefive:
Finally, is the recent flurry of legislative activity involving climate change (i.e., the President’s new energy initiative or climate change bills being introduced in Congress and in some states) likely to have any impact on the deliberations of the Task Force?

Director Wagner:
One of the roles of the Task Force will be to monitor legislative activity to determine if legislative proposals impact our deliberations. If it is appropriate, we will comment on any that we believe impact the insuring public, insurers and insurance regulators.