The New York Department of Financial Services (DFS) issued its 2021 Update on New York Domestic Insurers’ Management of the Financial Risks from Climate Change, analyzing 2021 survey responses from the National Association of Insurance Commissioners (NAIC) Climate Risk Disclosure Survey or alternatively the Task Force on Climate-Related Financial Disclosures (TCFD). The report summarizes the submissions made by domestic insurers, highlights advances over the previous year, and reiterates DFS expectations while providing examples of good practices.
85 insurance groups and 10 unaffiliated insurers submitted survey responses or disclosures to DFS. Compared to 2020 responses, 2021 responses showed meaningful progress on the qualitative metrics DFS analyzed. However, in its analysis, DFS emphasized that most of the improvements came from responses that were rated in 2020 as “Yet to Start” or “Early Stage.” Furthermore, very few of the responses that were rated as “Making Progress” in 2020 advanced to “Good Progress” in 2021. DFS reports that more insurers have committed to net zero greenhouse gas emissions in underwriting or investment portfolios by 2050 or sooner while some have included proactive support of the low-carbon transition and customer resilience as part of their investment or underwriting strategies.
DFS also used the report to highlight examples of good practices identified in the submitted responses. While these highlighted examples are anonymous, they are directly extracted from individual company responses. The highlighted good practices are informed by the Guidance for New York Domestic Insurers Managing the Financial Risks from Climate Change published by DFS in 2021. The identified good practices emphasize board and senior management participation in developing and implementing corporate climate strategies, integration of climate considerations into control functions and risk management, and climate as part of investment and underwriting strategies. (See also, Insurance Circular Letter No. 15 (2020) (September 22, 2020))
For over ten years, DFS and other states have required insurers under their supervision to submit NAIC survey responses. Earlier this year, in response to recommendations made by the U.S. Financial Stability Oversight Council (FSOC), the NAIC redesigned its disclosure survey to better align with the TCFD survey. When insurers submit their 2022 NAIC disclosure survey they will utilize the new survey thematically organized around (i) governance, (ii) strategy, (iii) risk management, and (iv) metrics and targets. Furthermore, New York domestic insurers will need to consider the guidance described above when preparing their submissions.
DFS will host a webinar on August 2, 2022, at 10:00am EST, to provide an overview of the 2021 update. Interested parties can register here.
See New York Releases Final Guidance for Insurers on Managing the Financial Risks from Climate Change for a summary of the requirements in the final guidance.
See SEC and the NAIC Propose Significant New Climate Reporting Requirements and NAIC Adopts New Climate Risk Disclosure Standard for its Survey for a summary of the changes made to the NAIC Survey.