Regulators tout climate mitigation as key to calming insurance markets

Image of city against a roiling ocean. Climate mitigation.

By John Hilton

State insurance regulators are taking the first steps on what will be long and difficult effort to mitigate climate impacts. Foremost it will require cooperation and buy in.

To that end, the National Association of Insurance Commissioners took the rare step of holding a media briefing Friday to again spotlight its landmark National Climate Resilience Strategy. Adopted March 18, the strategy is a desperately needed first step, said Andrew Mais, Connecticut insurance commissioner and 2024 president of the NAIC.

“The goal of a strategy is to drive faster and more effective risk reduction by state insurance regulators to ensure that insurance continues to be available and reliable for communities across our nation,” Mais said.

The NAIC climate strategy "provides for a unified approach, data collection and utilization, and resiliency actions, including the launch of a comprehensive NAIC Climate Risk Dashboard to measure and evaluate protection gaps,” the NAIC has said. “Among its actions, the NAIC will also seek to create new resilience tools, advocate for pre-disaster mitigation funding, and develop scenario analysis resources for state regulators."

Insurers leaving

Regulators committed to a climate response after insurers began pulling out in droves from disaster-plagued states such as Florida, Louisiana and California.

Ricardo Lara, insurance commissioner for California, played a key role in shepherding the strategy. The climate crisis is an insurance crisis, he said.

“We have worked with members from over 40 different jurisdictions on this really historic strategy,” Lara said. “We are, as we all know, experiencing the impacts of climate risk. And we are here because insurance can no longer be an afterthought when it comes to resiliency and our ever-changing climate.”

The NAIC strategy does not require any actions by insurers, noted Lori Wing-Heier, Alaska insurance director.

“We are hoping that if we can address things from zoning laws to construction to the hardening programs … that that in itself will draw insurance companies back to places that are having troubles with insurance,” she explained.

Several states in high-risk areas are offering matching grants to residents for home-hardening projects like impact windows and doors, reinforced garage doors, and new roofs with roof-deck attachments, roof-to-wall connections, and secondary water barriers.

The California Safer from Wildfires program, for example, provides premium incentives for reducing wildfire risk through home hardening, while the Strengthen Alabama Homes program provides grants to homeowners to retrofit properties based on the Insurance Institute for Business and Home Safety standard.

'Affordable and available'

A core goal of the strategy is identifying areas where insurance access is curtailed due to the impact of climate disasters. The NAIC recently launched the Property & Casualty Market Intelligence Data Call to collect and analyze data covering more than 80% of the U.S. property insurance market by premium volume.

Announced March 8, the data call will gather data from more than 400 property insurers operating locally and across the country to give state insurance regulators “a clear sense of what is happening in their individual property markets and the nation overall,” a news release said.

The NAIC strategy will eventually establish a Climate Risk Dashboard to target priority areas for insurance availability.

As climate risks evolve, so with the NAIC approach, Mais said. Mitigation is the key to stabilizing insurance markets, he said.

“What we want to do is to keep insurance affordable and available,” Mais added. “If you're making an investment in mitigation, depending on what you're doing, the return is anywhere between $1 and $12. That's what we need to do and that's what we're trying to drive.”

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.