Federal Insurance Office Report Sees Fragmented Approach to Climate-Related Risks
WASHINGTON, D.C. – The U.S. Treasury Department’s Federal Insurance Office (FIO) today released a report on climate-related regulation and supervision of insurers. The report assesses the limitations of existing regulation and includes 20 recommendations.
In response, Carly Fabian, insurance policy advocate with Public Citizen’s Climate Program issued the following statement:
“The report sends a strong signal to state regulators across the country that they need to move quickly to assess growing climate-related financial risks to the insurance sector. As insurance companies continue to invest in and underwrite fossil fuels while abandoning homeowners in vulnerable areas, it’s increasingly clear that the industry is willing to harm its customers and undermine its own markets in pursuit of short-term profits. Regulators must step in and require insurers to mitigate the risk by reducing their financed and insured emissions.
“As insurers like AIG and State Farm limit coverage in climate-vulnerable areas, FIO should move forward quickly with its proposed data collection to identify trends in the availability and affordability of insurance and assess their effects on consumers and potential threats they could pose to financial stability.
“We appreciate that the report highlights important initial steps by regulators in Connecticut and New York and provides detailed recommendations on scenario analysis and risk-based capital requirements, as well as the need for more resources to protect consumers. However, we urge FIO to continue to evaluate the potential for a growing coverage gap to contribute to systemic risks and provide additional recommendations to regulators and the Financial Stability Oversight Council.”
Alex Martin, Policy Director for Climate and Finance with Americans for Financial Reform Education Fund added: “Insurance disruptions are the canary in the coal mine of climate financial risk, and climate shocks are already making parts of America uninsurable, with negative impacts disproportionately falling on underserved communities and communities of color. The stakes are huge and federal and state regulators need to use all tools available to understand and mitigate these risks.”
Public Citizen submitted detailed comments in response to a 2021 request for information on climate-related risks to insurance markets. Public Citizen also offered detailed recommendations in response to a 2022 request for comment on FIO’s proposed climate risk data collection, along with filing a comment representing 75+ organizations in support of the data call. Americans for Financial Reform Education Fund also submitted detailed comments to the FIO request for information and data call.
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