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May 01, 2009 at 04:00 AM
On March 17, the National Association of Insurance Commissioners (NAIC) approved a compromise version of the climate change survey sent out for comments in 2008. The survey, now consisting of eight questions regarding insurers’ efforts to mitigate the risk of climate change in their business, was whittled down in the wake of comments from the industry.
Some insurance trade groups are still unhappy with the survey. Robert Detlefsen, VP for public policy of the National Association of Mutual Insurance Companies, refers to it as “less bad than originally proposed,” but says it does not fall within the purview of regulators to inquire into the activities of insurance companies regarding climate risk. Nonetheless, the questionnaire mandates a response by all insurer groups with premiums over $500M in 2009, and by all insurer groups with premiums over $300M in 2010 and thereafter. Smaller companies may be asked to complete the survey voluntarily.
Companies must report not only on how they are changing their risk management and catastrophe risk modeling to account for climate change factors, but also on how they are educating policyholders and policymakers on the risks of climate change and how their investment strategies are changing based on their awareness of such risks.
Joel Ario, chairman of the NAIC Climate Change and Global Warming Task Force, says of the survey, “Every environmentalist wanted it to be more comprehensive and require more definitive answers, and the industry wanted it to be shorter with less definitive answers.” The compromise not only gives the public a “better idea of how insurers assess the risk,” it compels insurers to find ways to mitigate that risk, he argues.
Despite protests from some trade industry groups, Ario says that insurance companies are “notoriously risk averse,” and believes that they “will do everything they can to manage [risk] as best they can.” He adds, “As awareness builds of the kinds of risk and the science gets stronger, and their modeling shows how risk translates into their book of business, they will get more interested in mitigating that risk.”
