DFS Climate Change Webinar Series - Insurance
2021 Update on New York Domestic Insurers' Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Reponses and Other Reporting
As part of the ongoing efforts of the New York State Department of Financial Services (“DFS”) to evaluate insurers’ management of climate-related financial risks (“climate risks”) and provide resources that will accelerate the industry’s progress, DFS has issued a report on “2021 Update on New York Domestic Insurers' Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Reponses and Other Reporting” (the “2021 Update”). This follows DFS’s issuance of Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (“Guidance”) in November 2021, detailing DFS’s supervisory expectations for New York domestic insurers’ management and disclosure of their climate risks.
Previously, DFS had analyzed the responses submitted by insurers in 2020 to the National Association of Insurance Commissioners Climate Risk Disclosure Survey (“Survey”), as well as Task Force on Climate-Related Financial Disclosures (“TCFD”) reports provided by insurers in lieu of Survey responses (together with the Survey responses submitted in 2020, the “2020 responses”). DFS issued a report in July 2021, New York Domestic Insurers' Management of the Financial Risks from Climate Chang - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting from 2020 (“2020 Report”), containing the results of that analysis and examples of good practices described in the 2020 responses.
This latest report contains the results of DFS’s review and analysis of the Survey responses and TCFD reports of 85 insurance groups and 10 unaffiliated insurers submitted in 2021 (the “2021 responses”), as well as their progress when compared to the 2020 responses captured in the 2020 Report. This review and analysis cover groups or unaffiliated insurers with countrywide premiums ranging from $100 million to almost $200 billion. The 2021 Update focuses on the five Survey questions most relevant to the Guidance grouped into three themes – Risk Culture and Governance, Risk Management, and Modeling and Scenario Analysis – and analyzes the responses.
Based on a framework that it had developed for the 2020 Report, DFS rated insurers’ responses in one of four categories: “Yet to Start,” “Early Stage,” “Making Progress,” or “Good Progress.” The 2021 Update also contains examples of good practices described in the 2021 Survey responses.
DFS intends to continue reviewing insurers’ Survey responses and other disclosure materials to: (i) understand insurers’ overall status in identifying, assessing, and managing climate risks, (ii) identify good practices that can be shared with the industry, (iii) support risk-based supervision by identifying insurers that appear to lag, generally or in a specific area, compared to their peers, (iv) verify compliance of insurers’ implementation of the supervisory expectations set forth in the Guidance with the existing timeline, and (v) inform the establishment of timelines for implementation of the remaining supervisory expectations set forth in the Guidance.
Insurers’ ratings will be used only for DFS’s supervisory purposes and will not be publicly disclosed.