Treasury Department looks for climate risks lurking in property insurance
The Treasury Department is launching a first-of-its-kind initiative to uncover climate-related risks to private insurance markets.
The big picture: Property insurance is becoming harder to find and more expensive in states like California that have been hard hit by climate change-related extreme weather events.
- Similar dynamics are at work in Florida in the wake of Hurricane Ian and other recent storms. The declining availability and affordability of home insurance could put it out of reach of more homeowners.
Zoom in: Treasury's Federal Insurance Office (FIO) is seeking comments on a proposed data collection from property and casualty insurers in all 50 states to help assess climate-related financial risks across the U.S.
- This would be the first data collection request from the FIO, which was given that authority under the Dodd-Frank financial reforms in 2010.
- The data collection proposal is aimed at identifying the potential for disruptions to private insurance coverage in parts of the country that are especially at risk of climate impacts.
It would generally apply to large property and casualty insurers in most states. It would not apply to small insurers with policies below $100 million, with the exception of those in 10 particularly at-risk states.
- The information would be aggregated by ZIP code, and would not include information on individual homeowners' policies. It would also go back five years to try to capture market shifts.
State of play: The FIO's data request, which will have a 60-day comment period, is part of work underway at Treasury, the Federal Reserve and the SEC, among other institutions, to determine the risks climate change poses to the financial system more broadly.
- On Oct. 3, for example, the Financial Stability Oversight Council named members of a new panel on climate-related financial risk that will advise financial regulators across the government.
- The SEC is in the process of issuing climate risk disclosure requirements for public companies.
- The Fed plans to conduct experimental climate change scenario analyses with six major banks next year.
What they're saying: "This issue of climate related financial risk in the insurance sector is here, it's real. I think there's no ignoring it. No denying it," said Graham Steele, Treasury's assistant secretary for financial institutions, in a statement to Axios.
- "[The] FIO's data collection will add to the work of regulators and policymakers across the administration to assess climate-related risks to the financial system, the U.S. economy, and the American people," Treasury Secretary Janet Yellen said in a statement.