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NAIC Unveils Revolutionary Climate Resilience Strategy for Insurance Sector

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Benjamin Hughes

April 5, 2024 - 23:46 pm

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Building a More Resilient Nation: NAIC Sets a Groundbreaking Strategy for Insurance and Climate Change

A Unifying Agenda for Climate Resilience

WASHINGTON, April 5, 2024—In a major step towards fortifying the nation against the perils of natural calamities, the National Association of Insurance Commissioners (NAIC) has taken a significant stride by adopting a pioneering NAIC National Climate Resilience Strategy for Insurance. This groundbreaking strategy aims to buttress the United States’ property insurance market amidst an era marked by escalating climate risks.

The blueprint of this strategy has been meticulously crafted under the stewardship of NAIC's Climate and Resiliency Task Force, co-chaired by revered Alaska Division of Insurance Director Lori K. Wing-Heier and the esteemed California Insurance Commissioner Ricardo Lara. A consortium of astute U.S. insurance regulators contributed their diverse perspectives to this strategy. Their collective expertise encompasses a gamut of geographical jurisdictions – from expansive to diminutive, coastal to inland, and urban to rural, all the way to island territories that are grappling with urgent and distinctive climatic adversities.

Driving Effective Risk Reduction

The objective of the National Climate Resilience Strategy is centered on igniting more rapid and efficacious risk mitigation initiatives led by state insurance regulators. This is crucial to ensure the sustained availability and dependability of insurance — core to the infrastructure that supports communities assailed by climate-related threats. By providing state regulators with an arsenal of techniques and a contingency plan, the strategy underlines key areas such as reinforcing homes against wildfires, floods, and storms, utilizing advanced catastrophe modeling, elevating public awareness of potential dangers, and enforcing solvency tools that adhere to current climate risk assessments.

In line with this impartial strategy, a monumental component is the states' Property & Casualty Market Intelligence Data Call (PCMI). Unveiled on March 8, this venture will collate comprehensive data from over 400 property insurers operating both locally and nationwide. The primary objective is to equip state insurance regulators with an unobstructed view of the trends within their respective property markets, as well as the overall national landscape. Comprehensive data call details are available for reference.

"Our property markets and consumers require robust defense mechanisms. The PCMI data call and the National Climate Resilience Strategy for Insurance are pivotal in bridging protection gaps, solidifying the foundations of every locale," declared Director Wing-Heier. She further added that this strategy synthesizes numerous existing endeavors, prioritizes proactive risk management before disasters strike, and ensures essential coordination among U.S. state regulators.

Commissioner Lara added, "At the vanguard of crafting safer communities in the face of extreme weather and climatic shifts, U.S. states play a pivotal role. Our national strategy positions risk reduction and consumer protection at the forefront of efforts to shield communities across the country."

NAIC President and Connecticut Insurance Commissioner Andrew N. Mais stated, "Narrowing the protection gap necessitates augmenting property defenses and enhancing the vigor with which we oversee solvency protection. The ubiquity of this issue across states and territories beckons a concerted national response to assure the continued availability and reliability of insurance solutions."

Pioneering Programs and Standards

The California Safer from Wildfires Program is a prime illustration of incentivizing the reduction in wildfire risks through property fortification, while the Strengthen Alabama Homes program offers grants to homeowners to retrofit their homes to the robust standards set by the Insurance Institute for Business and Home Safety (IBHS) through its Fortified program. In addition, Minnesota's recent legislative efforts mirror the importance of providing incentives for homes that meet this standard, showcasing the diverse application of such policies across different regions. Other states are contemplating similar legislative movements.

Enhancing State Regulators' Toolkit

The NAIC National Climate Resilience Strategy offers a comprehensive plan for state insurance regulators. It encompasses actions that involve:

  • Gathering data to pinpoint and mend protection gaps
  • Charting a visionary course for the future of flood insurance
  • Utilizing the newly minted Catastrophe Modeling Center of Excellence
  • Creating innovative resilience tools
  • Championing funding for pre-disaster mitigation efforts
  • Refining solvency tools, including scenario analysis

These measures collectively forge a comprehensive path for state regulators to navigate the complexities of climate change and its impact on the insurance industry.

The Climate and Resiliency Task Force first introduced the NAIC National Climate Resilience Strategy for Insurance in 2023, which after substantial public engagement, saw its adoption by the full NAIC Membership at the NAIC Spring National Meeting on March 18, 2024.

The NAIC’s Commitment to the Insurance Regulatory Framework

The NAIC operates as a pivotal element within the United States’ system of state-based insurance regulation, providing critical expertise, data, and analytical tools to insurance commissioners, empowering them to regulate the industry effectively and safeguard consumer interests. The organization's governance structure includes the chief insurance regulators from all 50 states, the District of Columbia, and five U.S. territories. Together, through the NAIC, these regulators develop standards, establish best practices, perform peer reviews, and orchestrate regulatory oversight. NAIC staff are instrumental in these initiatives, representing the combined views of state regulators both on the domestic front and on the international stage.

In conclusion, with the adoption of the NAIC National Climate Resilience Strategy for Insurance, a new chapter begins for the property insurance industry in the United States. This strategy not only reinforces the market but also galvanizes regulators at all levels to collaborate in fortifying communities against the inevitable challenges of climate change.

For more information on the NAIC and its activities, please visit the source of this news release, the National Association of Insurance Commissioners.

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