NAIC regulators pushed by Feds into climate data collection, advocates say

The NAIC will cooperate with the Federal Insurance Office on climate data collection.

By John Hilton

The Treasury Department settled a long-running dispute with state insurance regulators over climate data collection, announcing Friday that they will partner to compile the data from insurers.

The NAIC will be collecting, on behalf of participating state insurance regulators, ZIP Code-level data from the largest homeowners insurers, the Treasury Department announced in a news release. The Federal Insurance Office "will be closely coordinating with the NAIC as the NAIC shares granular information with FIO in the coming months," the release said.

FIO will use this data to conduct a nationwide assessment of climate-related financial risks to consumers across the United States, the release stated.

“Americans across the country are seeing the affordability and availability of their insurance policies decline as a result of increasingly severe climate-related disasters,” said Secretary of the Treasury Janet L. Yellen. “Analysis of homeowners insurance data is essential to understanding the market impacts on consumers and helping policymakers across the country respond appropriately to the risks.”

The surprising announcement drew criticism and derision from consumer advocates who recalled the NAIC long resistance to climate data collection by the Feds.

"During 40 years of work helping consumers of insurance, I have observed that the NAIC, which normally avoids taking action needed to protect consumers, suddenly becomes ‘brave’ at moments like this, when they fear the federal government is about to do what they should have been doing all along," said Bob Hunter, insurance director emeritus for the Consumer Federation of America and former Texas insurance commissioner.

An NAIC news release on the data call does not mention "climate," instead referring to the effort as a property and casualty data call, "to give state insurance regulators a clear sense of what is happening in their individual property markets and the nation overall."

The data call "comes at a critical juncture in U.S. history as the increasing frequency and severity of weather events, rising reinsurance costs, and inflationary pressures are making property insurance availability and affordability more challenging for a growing number of regions across the nation," the release said in the only mention of climate-related impacts.

Federal effort announced in 2022

To this point, the FIO had planned to proceed alone with its first-ever collection of climate data from insurers. That decision provoked NAIC regulators, who wrote in November 2022: “FIO has failed to demonstrate a good faith effort to engage with state regulators and has exhibited their intention to forgo a collaborative effort to identify and collect accurate and useful data.”

Consumer advocates – including the Consumer Federation of America, the Center for Economic Justice, and Public Citizen – applauded the Treasury Department for "pushing" insurance regulators into the data collection.

Unlike regulators for other financial services, state insurance regulators have refused for decades
to collect the granular consumer market outcome data needed to monitor the availability and
affordability of auto and home insurance, the groups noted.

“It is clear that absent the FIO effort to address the gaping holes in state insurance market
monitoring, the insurance regulators would have continued to do nothing to modernize data
collection for market regulation,” said Birny Birnbaum, longtime consumer representative at the
NAIC and director of the CEJ. “FIO has demonstrated the wisdom of Congress, which created the agency as a key post-financial crisis reform with the mandate and tools to monitor the industry and identify gaps in state insurance consumer protection."

Climate data quality questioned

While praising the new data collection effort, the consumer groups also noted that it is limited in scope. Despite evidence of condominium associations, cooperatives, and affordable rental housing developers seeing few insurance choices and massive premium increases, the data call will not capture anything about the "most vulnerable portions of the market," the groups claimed.

Several major insurance companies abandoned or reduced coverage in areas hardest hit by natural weather disasters. For example, insurers representing 60% of the property & casualty market have stopped or reduced writing policies in California due to wildfire risks.

The NAIC should commit to expanding future data collection to better understand the impact of climate risk on Americans beyond those who live in single family homes, the groups said.

"While anecdotal data, voluntary industry surveys, and data from last-resort programs have
effectively raised the alarm, these have not painted a full picture, and selective disclosures from
insurers can just as easily be used to exploit a crisis as they can to solve it," said Carly Fabian,
insurance policy advocate at Public Citizen. "The success of the NAIC's efforts, and Treasury's
reliance on them, hinges on an accessible data source that is updated regularly with data from
every state."

The NAIC and FIO agreed that the NAIC will begin sending the data to FIO in June 2024, shortly after the close of the NAIC data collection. The NAIC has agreed to provide FIO with final data in late September, according to the Treasury Department news release.

FIO’s analysis of the data received will help respond to President Joe Biden’s 2021 Executive Order on Climate-related Financial Risk, which called on FIO to “assess, in consultation with States, the potential for major disruptions of private insurance coverage in regions of the country particularly vulnerable to climate change impacts.”

The data analysis will also advance FIO’s statutory mandates, including to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products and to monitor all aspects of the insurance industry, the release said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.