NAIC Reverses Course on Climate Survey, Makes Results Voluntary, Confidential

The National Association of Insurance Commissioners reversed much of its controversial climate risk disclosure process -- turning a mandatory and public survey of insurance companies into one that is voluntary and confidential -- after approving an implementation document not made public until after the vote.

The full membership, or plenary, approved the new document as the last official act of the NAIC's spring national meeting. The vote was 27-22, with seven commissioners either not present or not voting. The vote kept the eight climate risk disclosure survey questions intact, but the document referred to as "version three" explicitly leaves the choice of implementation up to the states, grants states the option of whether to make responses mandatory and ends a plan to make individual insurer responses public. According to the document, "Survey responses are confidential. The participating states shall coordinate with the NAIC to develop a public report giving information in the aggregate regarding insurer responses."

Andrew Logan, director of insurance for Ceres, a network of investors focusing on environmental responsibility, said the NAIC undermined its own credibility. "This calls into question the NAIC's commitment to a public and open process, and leaves the organization with a real black eye," he said. "Why would an interested party choose to engage with the NAIC when years of work can literally be killed behind closed doors?"

South Carolina Insurance Director Scott Richardson, who initiated the vote, said the mandatory and public survey plan approved by the NAIC executive committee and plenary in March 2009 had "very little support for the process." At least a handful of states -- including South Carolina -- were "thumbing their nose" by refusing to make it mandatory for insurance companies or groups under their jurisdiction, he said.

The survey plan, as designed by the Climate Change and Global Warming Task Force, was designed to have about 300 insurance companies or groups with annual premium of $500 million or more file a completed questionnaire with their respective state regulators by May 1, 2010. The survey seeks to gauge the level of steps taken by companies to identify, manage and mitigate potential risks arising from climate change-related issues in areas including internal operations, investment strategy and risk management (BestWire, March 17, 2009). The reporting level remains as a "suggested guideline" in the new document.

The new survey plan had not been made public before the vote and had not been voted on by the task force. "I think it's not a good public process, adapting something nobody's put in writing," Task Force Chairman and Pennsylvania Insurance Commissioner Joel Ario said. "There are going to be real serious problems."

Ario defended the original plan, saying, "I believe we set an important bar for accountability and public transparency." One goal of the original survey was to foster stronger awareness of individual company efforts to account for climate change. Ario noted that 18 of the largest insurer groups are already disclosing similar information through voluntary participation with the nonprofit Carbon Disclosure Project.

Foes of the original climate survey process expressed mixed feelings about the NAIC vote. Robert Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, said he liked the outcome of the vote, but not the process. "Nobody follows this more closely than me and I've only seen version one," he said.

David Kodama, director of policy analysis for the Property Casualty Insurers Association of America, said he was uncomfortable with how the vote was done, but that it does not change strategy. PCI will continue to make its case commissioner by commissioner, state by state, he said.

Ario said he never expected every state to go along with the survey, but that he will go ahead and make it mandatory in Pennsylvania. California, Wisconsin and Washington state are also among the states that have begun to implement the survey.

"The net effect of today's vote is zero," said Illinois Insurance Director Michael McRaith, who will also continue to make the survey mandatory. He criticized what he called the "hamster wheel" of the NAIC approving one path of action, then reversing course.

Richardson said the new plan will still provide results that are "suitably significant." Ohio Insurance Director Mary Jo Hudson, who also objected to the original plan, called the changes a clarification.

The new document contains a "qualifications" section both stating the gathered information cannot be used in reviewing rates and weighing in on the debate about climate change itself. It reads, in part, "This survey, and the questions contained herein, do not endorse, reject or otherwise express an opinion on the existence or absence of climate change. Further, this survey, and the questions contained herein, do not express an opinion regarding scientific confirmation or refutation of the existence or absence of climate change."

David Snyder, vice president and associate general counsel for the American Insurance Association, said his organization will continue to support uniformity in information-gathering. The AIA supported the previously approved survey plan after objecting to earlier, more probing drafts.

(By Sean P. Carr, Washington Correspondent: [email protected])