NAIC Adopts First National Climate Resilience Strategy for Insurance to Close Coverage Gaps and Improve Recovery from Natural Disasters

Putting the focus on reducing losses and speeding recovery from natural disasters, the National Association of Insurance Commissioners’ (NAIC) Membership adopted the first-ever NAIC National Climate Resilience Strategy for Insurance to protect the nation’s property insurance market.

The strategy was developed under the coordination of the NAIC’s Climate and Resiliency Task Force, co-chaired by Alaska Division of Insurance Director Lori K. Wing-Heier and California Insurance Commissioner Ricardo Lara, bringing together insights and approaches from U.S. insurance regulators representing jurisdictions that are large and small, coastal and inland, and urban and rural, as well as the island jurisdictions that face urgent and unique challenges.

The goal of the strategy is to drive faster and more effective risk reduction by state insurance regulators to ensure that insurance continues to be available and reliable as a crucial backbone to communities facing climate risks. This strategy gives regulators the tools to do that and an action plan by advocating for home hardening from wildfires, floods, and storms; utilizing catastrophe modeling information; better informing the public of risks; and making sure new solvency tools are updated to incorporate further analysis of climate risks.

A linchpin of the nonpartisan strategy is the states’ Property & Casualty Market Intelligence Data Call (PCMI) to collect and analyze data covering more than 80% of the U.S. property insurance market by premium volume. Announced March 8, the PCMI data call will gather data from more than 400 property insurers operating locally and across the country to give state insurance regulators a clear sense of what is happening in their individual property markets and the nation overall.

“Our property markets and the consumers we work to protect are under pressure. The PCMI data call and the National Climate Resilience Strategy for Insurance will help us close protection gaps and make every community stronger and more resilient,” said Director Wing-Heier. “This strategy document brings together many of our existing workstreams, focuses our work on pre-disaster risk mitigation, and will provide important coordination among U.S. state regulators,” Wing-Heier added.

“U.S. states are in the forefront of making safer communities to withstand extreme weather and climate change, which is critical to keeping insurance available for all,” said Commissioner Lara. “Our national climate resilience strategy puts reducing risks and protecting solvency at the center of our work to protect consumers.”

“Closing the protection gap means hardening properties and continuing to vigorously monitor solvency protection oversight,” said NAIC President and Connecticut Insurance Commissioner Andrew N. Mais. “As insurance regulators are seeing in our states and territories, this is a national problem that calls for a national strategy to ensure that insurance remains available and reliable.”

The California Safer from Wildfires program, for example, provides premium incentives for reducing wildfire risk through home hardening, while the Strengthen Alabama Homes program provides grants to homeowners to retrofit properties based on the Insurance Institute for Business and Home Safety (IBHS) Fortified standard. Last year, the state of Minnesota passed a similar law requiring incentives for homes that meet the Fortified standard, demonstrating the regional diversity of such approaches. Other states are considering similar legislation.

The NAIC National Climate Resilience Strategy addresses state insurance regulators’ plans to:

• Collect data to help identify and close protection gaps
• Create a blueprint for the future of flood insurance
• Leverage the recently created Catastrophe Modeling Center of Excellence
• Create new resilience tools
• Advocate for pre-disaster mitigation funding
• Improve solvency tools, such as scenario analysis

The Climate and Resiliency Task Force adopted the NAIC National Climate Resilience Strategy for Insurance in 2023 and exposed it for public comment before it was adopted by the full Membership at the NAIC Spring National Meeting on March 18, 2024.