Three congressional Democrats on Monday requested an update from the National Association of Insurance Commissioners (NAIC) on the progress of incorporating climate-related risks into the industry.
In 2023, the Treasury Department’s Federal Insurance Office (FIO) issued 20 recommendations for the NAIC, including weighing changes in Risk-Based Capital formulas for climate disasters such as floods and hurricanes. The FIO also recommended developing a national standard for materiality — a circumstance that would affect an insurers’ assessment of whether a policy is worth the risk — for climate-related risks.
In the Monday letter, Senate Budget Committee Chair Sheldon Whitehouse (D-R.I.), House Financial Services Committee ranking member Maxine Waters (D-Calif.) and Rep. Sean Casten (D-Ill.) asked NAIC President Andrew Mais for further information on the organization’s progress by Aug. 26.
The members noted increasing numbers of private insurers have left climate change-affected states like Louisiana, California and Florida, forcing state-owned “insurers of last resort” to expand their services to cover the losses, which itself could disrupt the mortgage and real estate markets. Federal Reserve Chair Jerome Powell has also testified before Congress that climbing insurance costs have contributed to ongoing inflationary pressure.
“The insurance crisis is also compounding our nation’s worsening housing crisis. For example, a coalition of 24 private, for-profit and non-profit housing developers wrote to Congress and President Biden to express their concern that insurance market volatility is threatening the availability and affordability of housing markets nationally,” the members wrote.
“In fact, some nonprofit affordable housing developers have experienced 300-450% insurance cost increases that have completely halted development projects.”
Casten, also a member of the Financial Services Committee, previously questioned Treasury Secretary Janet Yellen in July on gaps in NAIC data on climate risk due to lack of participation from nine states on an NAIC/FIO joint data call.
The NAIC referred The Hill to a statement saying it received the letter on Monday and was reviewing it.
“The NAIC and its members have had a Climate and Resiliency (EX) Task Force for several years and were among the first financial regulators to adopt climate risk-related disclosures, reflect catastrophe risks in our risk-based capital system, gather data, and develop a comprehensive plan for resilience,” it said.
“NAIC members have built out regulatory tools and guidance across these and other areas to ensure the state-based regulatory system has comprehensive insights into the impact of climate risk and extreme weather on insurance markets across the country.”
Updated: 5:23 p.m.