What You Need to Know
- The New York State Department of Financial Services has proposed guidance that could affect all insurers domiciled in the Empire State.
- The department wants insurers to think about hurricanes, floods, wildfires, droughts and chronic shifts in weather patterns.
- All insurers, regardless of size, would have to have a written climate risk management policy.
The New York State Department of Financial Services is preparing to require all insurers operating in the state to develop detailed, written plans for managing climate risk.
The department has proposed guidance that would require life, health and annuity issuers to analyze how hurricanes, floods, wildfires and droughts could affect their investment portfolios.
The public comment period for the guidance is set to end June 23.
New York department officials say they would let smaller insurers start out preparing simpler analyses.
“However, all insurers regardless of size, are expected to analyze their climate risks,” officials say in the proposed guidance. “Smaller insurers are not necessarily less exposed to climate risk, because they may have concentrated business lines or geographies that are highly exposed to climate risks without the benefit of the diversification available to larger insurers.”
Life Insurers’ Real Estate
Life insurers invest by owning real estate; writing mortgages; buying mortgage-backed securities; and buying bonds issued by real estate developers and mortgage lenders.
New York department officials say one kind of risk an insurer could discuss in its climate risk analysis is “the percentage of real estate investments exposed to climate-related flood risk.”
An insurer also should address how different types of climate risk could affect its ability to get cash by selling assets, officials say.