United States: U.S. NAIC retains climate resilience as 2022 regulatory priority
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As in 20211the U.S. National Association of Insurance Commissioners (“NAIC”), at its recent annual meetings, again identified climate risk/natural disasters and resilience as one of the four regulatory priorities for 2022, stating than :
“NAIC members will aim to finalize improved disclosures of climate-related risks by insurers and their impact on the insurance industry, assess the resilience of insurers on both sides of the balance sheet, close the insurance protection for consumers and to promote the economic benefits of mitigation techniques and strategies.The NAIC will move forward with consideration of establishing a Center of Excellence on Catastrophe Modeling to to make States more accountable in their risk analysis and mitigation efforts.
The charges adopted in 2022 for the NAIC’s Climate and Resilience Task Force (EX) (“C&R TF”) are:
Consider appropriate climate risk disclosures within the insurance industry, including:
- Assessment of the Climate Risk Disclosure Survey
- Assessment of alignment with other sectors and international standards
Assess financial regulatory approaches to climate risk and resilience in coordination with other relevant committees, working groups and working groups, such as the Financial Condition (E) Committee and the Financial Stability Task Force (EX), including:
- Evaluation of the use of modeling by carriers and their reinsurers regarding climate risk
- Assessment of how rating agencies integrate climate risk into their analysis and governance
- Assessing the potential solvency impact of insurers’ exposures, including underwriting and investments, to climate-related risks
- Assessment and development of climate risk disclosure, stress testing and scenario modeling
Consider innovative insurance solutions for climate risk and resilience, including:
- Assessing how to apply technology and innovation to mitigating storms, wildfires, other climate hazards and earthquakes
- Assessment of insurance product innovation aimed at reducing, managing and mitigating climate risks and closing protection gaps
Identify sustainability, resilience and mitigation issues and solutions related to the insurance industry.
Consider pre-disaster mitigation and resilience and the role of state insurance regulators in resilience.
The C&R working group has five work streams:
- Pre-disaster mitigation
- Climate Risk Disclosure
At its next meeting on February 28, 2022, the C&R Working Group will discuss proposed revisions to the Climate Risk Disclosure Survey.
1 See our February 16, 2021 legal update, “US NAIC Prioritizes Climate Risk and Resilience with a Focus on Related Disclosure.”
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