The increasing effects of climate change, demonstrated by the rise in the frequency and severity of climate-related disasters, presents new and increasing challenges for the insurance sector and policyholders. Insurers serve a critical role in the economy as investors, risk managers, and a risk transfer resource that helps protect policyholders from loss and assists in recovery from climate-related disasters. Given these risks and the importance of the insurance sector in addressing climate change, President Biden issued an executive order in May 2021 on Climate-Related Financial Risk, which called on the secretary of the Treasury to direct the Federal Insurance Office to assess climate-related issues or gaps in the supervision and regulation of insurers.
On Tuesday June 27, Brookings Metro will host an event discussing ongoing work to integrate climate-related risks into insurance supervision and regulation. Graham Steele, assistant secretary for financial institutions, will share details from the just-released Treasury Federal Insurance Office’s climate report which considers the climate-related risks faced by the insurance industry and highlights current efforts by the National Association of Insurance Commissioners and some state regulators to address those risks while also providing recommendations to better integrate climate-related considerations within the context of U.S. insurance regulation. A panel will follow to discuss reactions to the report and implications for current efforts at the U.S. state level.
Assistant Secretary Steele will highlight separate work that Treasury’s Federal Insurance Office is doing to assess the potential for major disruptions of insurance coverage in regions of the country that are particularly vulnerable to the impacts of climate change. To support this work, FIO issued a proposed data collection from certain homeowners’ insurers on historical and current underwriting data at a ZIP Code level. This proposed data collection would provide consistent, granular, and comparable insurance data to help assess the challenges with insurance availability in certain areas of the country.