The working group’s guidelines ensure transparency on climate risks
Insurance commissioners Ricardo Lara of California and Mike Kreidler of Washington this month officially asked all insurers who are currently required to report to them annually on climate change to start reporting their climate risks in accordance with the Task Force. on Climate-related Financial Disclosures (TCFD). TCFD is rapidly becoming the global standard for such reports for all industries around the world.
Commissioners Lara and Kreidler are among state insurance regulators who have required insurers to disclose their climate risks as part of an industry-specific investigation developed by the National Association of Insurance Commissioners since 2010. The NAIC Climate Risk Disclosure Survey is sent annually to insurance companies that generate $ 100 million or more in annual premium income and are licensed in participating states of California, Washington, Connecticut, Minnesota , New Mexico and New York. Participating insurers represent over 70 percent of the US insurance market.
The TCFD guidelines have been endorsed by G-20 finance ministers and endorsed by environmental groups and more than 1,800 companies around the world. Of particular relevance to insurers, the International Association of Insurance Supervisors and the Sustainable Insurance Forum endorsed the TCFD recommendations in 2017. The guidelines help insurance companies better understand concentrations of carbon-related assets in their investments and to recognize climate risks and opportunities in their investment strategies.
“California’s record-breaking wildfires and extreme heat waves call on insurance companies to take climate action to protect consumers,” said Commissioner Lara. “Every consumer will feel the effects of climate change, just like every insurance company, whether it sells home insurance or life insurance. Adopting a global standard for climate risk disclosure will put our insurance companies on a level playing field with other large companies by being financially prepared to face increasing climate risks. “
A webinar is planned for this month as an educational opportunity for insurers using the TCFD reporting guidelines.
“Climate change is a significant risk for insurers, and therefore policyholders, due to intensifying natural disasters and increasing claims,” Kreidler said. “Having access to climate-related financial information is essential so that insurer stakeholders – regulators, policyholders, investors and company employees – can understand the extent to which insurers take climate risk and events into account. severe weather they represent. “
The Climate Risk Disclosure Survey predates TCFD guidelines and has been published annually since 2010, including eight questions insurance companies should answer about how they incorporate climate risks into their mitigation plans. , risk management and investment. The eight questions in the climate risk disclosure survey align closely with TCFD guidelines and recommendations. The TCFD guidelines were established as a voluntary standard for disclosing climate-related financial risks for all industries in 2017.
Eight insurers used the TCFD guidelines last year, and more have agreed to adopt them this year. Responses to the Climate Risk Disclosure Survey for 2020 and earlier versions are available on the California Department of Insurance website.