A group of state insurance regulators adopted a new standard for insurance companies to report their climate-related risks, the National Association of Insurance Commissioners (NAIC) announced at its spring meeting in Kansas City, Mo.
The bipartisan initiative, led by Insurance Commissioners Ricardo Lara of California and David Altmaier of Florida, aligns with the International Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD standard is the international benchmark for climate risk disclosure and will help insurance regulators, and the public better understands the climate-related risks to the U.S. insurance market.
Lara and Altmaier are co-chairs of the NAIC Climate Risk & Resiliency Task Force, which was established in 2020 to coordinate all of the NAIC’s domestic and international efforts on climate-related risk and resiliency issues. This marks the first update to the NAIC’s Climate Risk Disclosure Survey approach since it was created in 2010.
The Task Force determined that implementing a TCFD-aligned disclosure framework would enhance transparency about how insurance companies manage climate-related risks and opportunities and incorporate international best practices. France, Switzerland, and the United Kingdom currently require TCFD-aligned reports.
Under the new standard, insurance companies required to respond to the annual NAIC Climate Risk Disclosure Survey will need to comply with TCFD reporting by November 2022. Fifteen states – including California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington – have committed to utilizing the NAIC survey in 2022 for insurance companies licensed in their jurisdictions. This represents nearly 80 percent of the U.S. insurance market.
“Our global climate crisis affects every state, requiring us to reach across partisan divides to find solutions that protect all people,” Lara said. “By holding insurance companies to this global standard for climate disclosure, insurance regulators are showing the power of united leadership in our efforts to address climate change and reduce the negative impacts on insurance consumers.”
In 2021, 28 insurance companies provided TCFD-compliant reports, but this list will grow to nearly 400 insurance companies and groups due to this initiative.
“The NAIC’s action shows that our system of state-based insurance regulation remains strong and flexible in responding to changing conditions in our markets and our world,” Altmaier said. “Thank you to my fellow regulators for your commitment to work together to protect consumers.”
International regulators and climate groups welcomed the news.
“By putting U.S. insurance companies on the same level of accountability and transparency with other global sectors and insurance markets in terms of managing and disclosing climate risks, U.S. state insurance regulators are showing the kind of leadership on a national scale that will help meet the global goals of climate-resilient communities and net-zero economies,” Butch Bacani, who leads the U.N.’s Principles for Sustainable Insurance Initiative, said.