NAIC to adopt revised climate disclosure mandate - APCIA raises concerns
The National Association of Insurance Commissioners (“NAIC”) Climate and Resiliency (EX) Task Force adopted a new form of the NAIC Climate Risk Disclosure Survey (“Survey”) to closely align with recommendations by the Task Force on Climate-Related Financial Disclosures.The revisions are expected to approved at the next National Meeting in April 2022.
The revised Survey would replace the existing eight-question format that assess insurer strategy and preparedness in the areas of investment, mitigation, financial solvency, emissions and engaging consumers. The survey has been administered annually since 2010 by several states (as of 2021, California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington State) and required of all insureres writing at least $100 million in gross premiums (nationally) who are licensed in on more more of these participating states. The California Department of Insurance administers the survey and has made responses publicly available on its website.
Regulators including the NAIC's own Center for Insurance Policy and Research (“CIPR”) and the New York Department of Financial Services (“DFS”) have accessed survey data for aggregate analysis on industry response to climate change. The NY DFS issued its own separate guidance on climate change on November 15, 2021, requiring New York domestic insurers to enhance the transparency of their integration of climate risks and emphasizing the importance of consistency of disclosures across jurisdictions, including internationally.
For the last two reporting years, insurers had already been encouraged to submit TCFD reports in lieu of the NAIC survey. TCFD reporting is already closely aligned with the NAIC survey and addresses governance, strategy, risk management, and metrics and targets. The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, established the TCFD in 2015. The TCFD issued recommendations for disclosure of climate-related risks in 2017, and it has quickly become the global gold standard for climate-related risk disclosure in the financial sector and across other industries, enabling consistency and comparative analysis.
The American Property Casualty Insurance Association has responded with concern that the new proposed survey requirements will place a burden on the hundreds of insurers, particularly, small to mid-sized companies, which had previously been filing responses to the eight survey questions. David Snyder, vice president, international and counsel for APCIA commented: “For these companies, there simply may not be enough time or they may not have the resources to provide useful narrative responses as currently proposed, considering the internal governance process that will be needed for thorough responses.”
The revised survey is expected to maintain the prior years' August 31st annual reporting deadline, although some state regulators have already indicated they may grant extensions, particularly for those companies who do not already report against the TCDF guidelines.
APCIA has advocated for the new requirement be phased in beginning in reporting year 2023 (due August 31st, 2024), arguing this approach would allow companies time to provide better and more meaningful responses, and more careful consideration of what matters are best discussed with regulators in a confidential setting and what are appropriate for public disclosure.
The NAIC revised survey can be viewed here. Some state regulators indicated the proposed revisions may be further revised before the NAIC National Meeting in order to better align with the SEC’s newly proposed disclosure requirements.
Source: NAIC, APCIA