Climate change and catastrophes will be among the top issues insurers and advocates will be following when the National Association of Insurance Commissioners holds its annual spring meeting in Orlando, Fla., March 29-31.
Insurer groups are concerned about the direction of the NAIC's Climate Risk Disclosure Working Group, which has drafted a proposal for increased disclosure of insurers' risks from the effects of global climate change. The proposal builds on a white paper which earned strong criticism from the insurance industry, particularly over provisions for detailed disclosure of climate risks associated with real estate holdings and other investments as part of an insurer's annual financial statement or in its management analysis (BestWire, Jan. 21, 2008).

"We share a desire to work together with the public and regulators on ways by which insurers can assist in reducing greenhouse gases which may contribute to global warming," said David Snyder, vice president and assistant general counsel for the American Insurance Association. "Unfortunately, the current direction of the commissioners is to create controversy through a set of disclosures that are not necessary for insurance regulation purposes and would fuel a litigation frenzy."

The working group bases its disclosure provisions on the Global Framework for Climate Risk Disclosure, developed by institutional investors, state pension funds, the United Nations Foundation and other interests. It includes components for emissions disclosure, strategic analysis of climate risk and emissions management, regulatory risks and physical risks.
Neil Alldredge, vice president of state and regulatory affairs for the National Association of Mutual Insurance Companies, fears the NAIC could adopt the climate change provisions as part of a standard financial disclosure statement that many states could implement automatically.

"This is more dangerous than a model," he said.

Insurer opposition to this type of disclosure "is another example of the need for transparency," said Birny Birnbaum, a NAIC consumer liaison and executive director of the Texas-based Center for Economic Justice. "They object to anything that leads to them providing information."

Far-reaching social and environmental trends pose the greatest insurance sector risks in 2008, according to an assessment by Ernst & Young.
Global climate change and its effects present the greatest risks facing the property/casualty industry, a recent report from Ernst & Young, called "Strategic Business Risk: Insurance 2008," said. Changing weather patterns may alter assessments concerning the probability of insured loss by windstorm and flood and force insurers to reconsider insurability criteria, such as in Florida, the study said (BestWire, March 12, 2008).

At the NAIC meeting, Florida Insurance Commissioner Kevin McCarty will lead a hearing of the Catastrophe Insurance Working Group, continuing a series focused on insurance in coastal markets. Past hearings have focused on catastrophe modeling by rating agencies, insurance issues in the Gulf Coast region and the regulation of catastrophe-modeling vendors.