U.S. Insurance Commissioners Endorse Internationally Recognized Climate Risk Disclosure Standard for Insurance Companies

A bipartisan group of state insurance regulators led by Insurance Commissioners Ricardo Lara of California and David Altmaier of Florida adopted a new standard for insurance companies to report their climate-related risks, in alignment with the international Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD standard is the international benchmark for climate risk disclosure and will help insurance regulators and the public to better understand the climate-related risks to the U.S. insurance market, which is the largest in the world. This announcement during the National Association of Insurance Commissioners’ (NAIC) spring meeting in Kansas City, Missouri, puts U.S. state insurance regulators on the forefront of climate risk disclosure to protect consumers.

Commissioners Lara and Altmaier are co-chairs of the NAIC Climate Risk & Resiliency Task Force (Task Force), which was established in 2020 to coordinate all of the NAIC’s domestic and international efforts on climate-related risk and resiliency issues. The Task Force developed the new TCFD-aligned survey over a 14-month public participation process led by Oregon Insurance Commissioner Andrew Stolfi and Rhode Island Superintendent Elizabeth Dwyer in coordination with Commissioners Lara and Altmaier, and marks the first update to the NAIC’s Climate Risk Disclosure Survey approach since it was created in 2010.

The Task Force determined that implementing a TCFD-aligned disclosure framework would enhance transparency about how insurance companies manage climate-related risks and opportunities and incorporate international best practices, among other benefits that the Task Force identified in the new standard. Insurance regulators from France, Switzerland, and the United Kingdom currently require TCFD-aligned reports. U.S. financial regulators such as the U.S. Securities and Exchange Commission are also taking steps toward requiring TCFD-aligned disclosures for other financial institutions.

Under the new standard, insurance companies required to respond to the annual NAIC Climate Risk Disclosure Survey will need to comply with TCFD reporting by November 2022. Fifteen states – including California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington – have committed to utilize the NAIC survey in 2022 for insurance companies licensed in their jurisdictions, representing nearly 80 percent of the U.S. insurance market. While 28 insurance companies provided TCFD-compliant reports in 2021, this list will grow to nearly 400 insurance companies and groups  as a result of the consensus demonstrated today.

“Our global climate crisis affects every state, requiring us to reach across partisan divides to find solutions that protect all people,” said California Insurance Commissioner Ricardo Lara. “By holding insurance companies to this global standard for climate disclosure, insurance regulators are showing the power of united leadership in our efforts to address climate change and reduce the negative impacts on insurance consumers.”

"The NAIC's action shows that our system of state-based insurance regulation remains strong and flexible in responding to changing conditions in our markets and our world," said Florida Insurance Commissioner David Altmaier. "Thank you to my fellow regulators for your commitment to work together to protect consumers."

“We have all been affected by climate-related events, including wildfires, floods, and increased extreme weather. The first NAIC climate risk survey, created more than 10 years ago, led the way at the time, and it’s great to see the NAIC lead again by being the first U.S. financial system regulator to adopt TCFD-aligned disclosure requirements,” said Oregon Insurance Commissioner Andrew Stolfi. “I’m grateful for the robust participation in this process over the past year and the strong support to adopt internationally aligned climate risk disclosures, and I look forward to continuing our work by supporting insurers in shifting to this new reporting framework.”

“Enacting the TCFD standard will give insurance regulators greater oversight of insurance companies’ strategies for addressing climate change through investments, board governance, and all areas of their operation, helping us to protect consumers in the future by reducing climate risks,” said Elizabeth Dwyer, Superintendent of Banking and Insurance for Rhode Island.   

“Our bipartisan action to endorse a common standard for disclosing insurance companies’ climate risks shows progress is possible on protecting consumers from the threats of a warming planet,” said Maryland Insurance Commissioner Kathleen Birrane. “Through our collective state level actions we are protecting consumers from climate risks that affect our whole nation.”

"I am delighted that the NAIC has adopted changes to our NAIC Climate Risk Disclosure Survey. Participating insurers will now disclose their climate change exposure using the internationally accepted TCFD," said Mike Kreidler, Insurance Commissioner of Washington and member of the Sustainable Insurance Forum. "Nearly 20 years ago I was privileged to start creating the Survey with my then-Climate Change Committee co-chair from Nebraska. I’m pleased that the Survey is now updated to reflect state-of-the-art disclosure requirements in line with international standards."

“Consumers in every state are facing increased threats from extreme weather. Taking united action is more critical than ever before to protect consumers’ access to affordable insurance," said Connecticut Insurance Commissioner Andrew N. Mais. "These standards for reporting insurance companies' climate risks and strategies will help regulators and consumers better understand and address the impacts of climate change."

“Few regulators have more experience and insight into the macroeconomic effects of climate risk than insurance regulators,” said Mike Consedine, Chief Executive Office of the National Association of Insurance Commissioners. “By modernizing the NAIC climate disclosure survey for the first time since its inception, participating members are taking a comprehensive and unified approach to protecting consumers through our state-based system of insurance regulation.”

International regulators and climate groups who have called for compliance with TCFD disclosures welcomed the news.

“With insurance companies’ investments and underwriting reaching around the globe, it is critical that insurance regulators speak the same language as we seek to protect markets from climate risks,” said Anna Sweeney, who supervises the United Kingdom’s insurance sector and serves as Chair of the UNDP Sustainable Insurance Forum. “With this landmark action by U.S. regulators, alongside the work of a number of leading jurisdictions, we are well on our way to holding the global insurance sector to the same standard, allowing nations and states to work across borders like never before.”

“By putting U.S. insurance companies on the same level of accountability and transparency with other global sectors and insurance markets in terms of managing and disclosing climate risks, U.S. state insurance regulators are showing the kind of leadership on a national scale that will help meet the global goals of climate-resilient communities and net-zero economies,” said Butch Bacani, who leads the U.N.’s Principles for Sustainable Insurance Initiative, the largest collaboration between the U.N. and the global insurance industry.

“Aligning U.S. insurance companies’ climate disclosures with the global norm is a major step forward to protect financial markets and consumers who rely on insurance for safety and security,” said Steven Rothstein, Managing Director, Ceres Accelerator for Sustainable Capital Markets. "The bipartisan leadership of Commissioner Lara of California and Commissioner Altmaier of Florida is in short supply around the globe. It is needed more than ever before as we address climate-related financial risks across investment portfolios and global supply chains.”

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Media notes:

• The Task Force for Climate-Related Financial Disclosures released the standards in 2017. The Task Force consists of 31 members from G-20 nations. Click here to read more: https://www.fsb-tcfd.org/

• TCFD reporting includes sections on governance, strategy, risk management, investments, and metrics, requiring companies to measure their progress and commit to reducing climate risks across all areas of their business.