Agency Information Collection Activities; Submission for OMB Review; Comment Request; Federal Insurance Office Climate-Related Financial Risk Data Collection for U.S. Homeowners Multi-Peril Underwriting Data
Notice of information collection; request for comment.
Citation: "88 FR 75380"
Page Number: "75380"
"Notices"
Agency: "Federal Insurance Office,
SUMMARY: Pursuant to the Federal Insurance Office Act of 2010 (FIO Act), the Federal Insurance Office (FIO) of the
DATES:
Comments must be received by
ADDRESSES: Written comments and recommendations for the proposed information collection should be submitted at https://www.reginfo.gov/public/do/PRAMain. Find this information collection by selecting "Currently under 30-day Review--Open for Public Comments" or by using the search function.
FOR FURTHER INFORMATION CONTACT: Copies of the submissions may be obtained from
SUPPLEMENTARY INFORMATION:
Title: Federal Insurance Office Climate-Related Financial Risk Data Collection for
OMB Control Number: 1505-NEW.
Type of Review: Request for a new OMB Control Number.
Description: On
FOOTNOTE 1 Executive Order on Climate-Related Financial Risk, Exec. Order No. 14030, 86 FR 27,967 (
FOOTNOTE 2 31 U.S.C. 313(c); E.O. 14030. FIO addressed the first undertaking for FIO under E.O. 14030 with the publication of its report Insurance Supervision and Regulation of Climate-Related Risks (
Under FIO's data collection, FIO will obtain consistent, granular, and comparable homeowners insurance data that is not otherwise publicly available on a nationwide level. This nationwide view is critical to understanding how climate-related financial risks impact families and individuals across state markets and
FIO Authorities Under the FIO Act, FIO's authorities include monitoring all aspects of the insurance sector, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance sector or the
FOOTNOTE 3 31 U.S.C. 313-314. END FOOTNOTE
Efforts To Collect Data From Other Sources
Before FIO seeks to collect data directly from insurers, the FIO Act requires FIO to coordinate with relevant insurance regulators in the 50 states, the
FOOTNOTE 4 31 U.S.C. 313(e)(4) provides that "Before collecting any data or information under paragraph (2) from an insurer, or affiliate of an insurer, the Office shall coordinate with each relevant Federal agency and State insurance regulator (or other relevant Federal or State regulatory agency, if any, in the case of an affiliate of an insurer) and any publicly available sources to determine if the information to be collected is available from, and may be obtained in a timely manner by, such Federal agency or State insurance regulator, individually or collectively, other regulatory agency, or publicly available sources. If the Director determines that such data or information is available, and may be obtained in a timely manner, from such an agency, regulator, regulatory agency, or source, the Director shall obtain the data or information from such agency, regulator, regulatory agency, or source. If the Director determines that such data or information is not so available, the Director may collect such data or information from an insurer (or affiliate) only if the Director complies with the requirements of subchapter I of chapter 35 of title 44, United States Code (relating to Federal information policy; commonly known as the Paperwork Reduction Act), in collecting such data or information. Notwithstanding any other provision of law, each such relevant Federal agency and State insurance regulator or other Federal or State regulatory agency is authorized to provide to the Office such data or information." END FOOTNOTE
FOOTNOTE 5 Agency Information Collection Activities; Proposed Collection, Comment Request; Federal Insurance Office Climate-Related Financial Risk Data Collection, 87 FR 64,134 (
FOOTNOTE
After the end of the comment period for the
FOOTNOTE 7 NAIC, "NAIC to Issue Data Call to Help Regulators Better Understand Property Markets," news release,
In sum, FIO has determined that the nationwide ZIP Code level data that it seeks to collect is not available or may not be obtained in a timely manner and has therefore determined to use its data-collection authorities under the FIO Act to obtain the necessary data directly from certain insurance groups. /8/
FOOTNOTE 8 31 U.S.C. 313(e). END FOOTNOTE
Importance of Data Collection
The proposed data collection would provide FIO with a nationwide view of homeowners insurance that is critical to understanding how climate-related financial risks impact families and individuals across
FOOTNOTE 9 See, e.g.,
FOOTNOTE 10
FOOTNOTE 11 See, e.g.,
FOOTNOTE 12
Purpose of Data Collection
FIO plans to use the information obtained from this data collection to perform a nationwide analysis to advance its statutory mandates and to respond to E.O. 14030. FIO will assess the impact of climate-related risk on the availability and cost of homeowners insurance in
The narrower focus of this data collection includes data that will help establish a national baseline for analytics in this area. There is also potential value in collecting and analyzing more detailed information in this area. FIO intends to conduct climate-related data collections and analyses in the future, with a goal of doing so on an annual basis. In its initial analysis, FIO will focus on understanding nationwide trends in underwriting data. In future data collections, FIO may analyze in more detail, among other things, climate-related impacts on traditionally underserved communities or consumers, minorities, and/or low- and moderate-income persons.
FIO will not publish data or analysis of specific companies or groups or comparisons of results across companies or groups. FIO also will not publish data on or analysis of the solvency of insurance companies or groups based on the data collected. When FIO publishes analyses based on the data it collects, such analyses will be based on group-level submissions that will be aggregated across insurance groups to the ZIP Code level.
Data Collection's Key Elements
The
Figure 1 below describes the initial proposed scope as well as FIO's changes to narrow that scope based in large part on stakeholder feedback. Among other things, FIO is removing data fields for which information is substantially similar to other fields, cannot be collected consistently at this time, or is not necessary for FIO's initial analysis. FIO believes that the narrower focus of this collection will improve data consistency and homogeneity and reduce the burden on the responding insurers.
Figure 1-Changes to FIO's Data Collection Key elements Proposed scope inOctober 2022 FRN Summary of changes Underwriting Focus Physical risk from underwriting by P&C insurers, excluding liability risk (13M) No changes. Insurance Lines of Business Homeowners Multi-Peril with 6 form types covering Mobile Homeowners, Owner Occupied Homeowners, and Other Homeowners policy form Homeowners Multi-Peril with 1 form type covering Owner Occupied Homeowners (form type HO-3, the most common homeowners policy types form). Insurers Nationwide insurers writing above a premium threshold of$ 100 million in 2021 homeowners insurance direct premiums Top nationwide homeowners insurance groups with 1 percent or more share of the homeowners insurance market based on direct premiums written written in 2022, and request data to be aggregated and submitted at an insurance group level for all homeowners insurance entities Additional insurers in order to achieve at least an 80 percent market share threshold in each of 10 states that are potentially the identified within the group. FIO has identified 14 homeowners insurance groups with 240 homeowners insurance entities meeting the most prone to climate-related disasters selection criterion. Data Fields 15 data fields covering information regarding claims, premiums, and losses that correspond to data fields reported byU.S. insurers 7 data fields (removing 8 data fields from proposed collection for which information is substantially similar to other fields, to State Insurance Regulators in annual filings, as well as additional policy information not collected on statutory filings cannot be collected consistently at this time, or is not necessary for the proposed initial analysis). Revise 1 data field for clarity (to collect number of policies not renewed or retained rather than premiums not renewed). Remove exclusion of non-weather-related damages from reporting on claims and losses. Reporting Framework Accident year reporting basis Accident year reporting basis for loss- and claims-related data, and calendar year reporting basis for premium-related data and policy information. (This change provides clarity on alignment with the format of statutory filings). Reporting Period 5 years of underwriting data (2017-2021) 6 years of underwriting data (2017-2022). Geographic Granularity ZIP Code level for allU.S. ZIP Codes applicable to in-scope insurers No changes . Geographic Scope Nationwide No changes .
FOOTNOTE 13 Liability risk is "a risk where an insured is liable to a third party as a result of or caused by any act, error, omission representation or statement by the insured." "Liability Risk Definition," Law Insider, https://lawinsider.com/dictionary/liability-risk. END FOOTNOTE
Underwriting Focus and Line of Business
FIO's data collection remains focused on the physical risk from underwriting by property & casualty insurers. The data collection also remains focused on the homeowners insurers multi-peril line of business. However, in large part in response to comments, this data collection will seek data relating to policies on a single form type (rather than the six forms proposed in the
FOOTNOTE 14 HO-3 policies comprise 55.5 percent of all homeowners insurance policies and 78.3 percent of all owner-occupied homeowners insurance policies. See NAIC, Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominimum/Coorperative Unit Owner's Insurance Report: Data for 2020 (
Insurers
For this initial data collection, FIO plans to collect data from the top homeowners insurance groups that have 1 percent or more of the
Data Fields
FIO plans to collect data from the Representative Sample Insurers using the FIO Climate Data Collection:
FOOTNOTE 15 For more details on the data fields, a copy of the Data Collection Form and the instructions for filling it out can be found on FIO's webpage, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices. END FOOTNOTE
The Number of Policy In-Force Exposures field represents the count of policies that are in effect (i.e., in-force) as of
The Total Dollar Value of Coverage for Dwelling, Other Structures, Personal Property, and Loss of Use field represents the total estimated value of insurance coverage for the dwellings or other property covered by the policies (i.e., the potential exposures) in a ZIP Code, as recorded at the effective date of the policies or the date of their most recent renewal. This field is necessary because the premiums charged for policies will vary with the value of the properties insured as well as other factors. The dollar value of coverage and various calculated fields derived from that (e.g., average premium per
FOOTNOTE 16 See, e.g., NAIC, Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner's Insurance Report: Data for 2020 (2022), Table 3, 4, and 5, https://naic.soutronglobal.net/Portal/Public/en-GB/DownoadImageFile.ashx?objectId=9803&ownerId=2006;
The Number of Policies Not Renewed or Retained field addresses the number of policies that are not renewed or retained at any time during the reporting year, including non-renewals that are either insurer-initiated or policyholder-initiated. This field is necessary because understanding the percentage of policies not renewed will help FIO to assess availability issues. FIO notes that non-renewals alone may not be an adequate representation of availability issues because policies could be discontinued by the policyholder for various reasons, such as homeownership changes or switching to insurers that are not Representative Sample Insurers.
This field is replacing the field proposed in the
FOOTNOTE 17
FIO is retaining a data field for non-renewals because many commenters noted the importance of collecting information on non-renewals in order to understand where insurers may be pulling back coverage. Monitoring the number of non-renewals will allow FIO to understand non-renewal rates as distinct from changes in premiums.
The Direct Premiums Written field is a measure of policyholders' cost of obtaining coverage, and is necessary because the average premium per home or per
The Total Direct Losses Paid field is necessary to understand how loss trends in each ZIP Code affect the availability and cost of homeowners insurance. Direct losses paid is the amount of money to date (for each accident year) that has been paid to, or on behalf of, policyholders, and does not include estimates of losses that have been incurred but not yet paid. FIO will analyze trends in paid losses (including on a per claim basis) by ZIP Code. FIO will also use this field to examine trends by ZIP Code in paid loss ratios (by dividing by premiums) and claims severity (by dividing by claims closed with loss payment) to better understand how underwriting metrics may reflect weather-related events.
The Total Direct Incurred Losses field is necessary because it provides a comprehensive measure of the value of an insurer's loss experience in a reporting period by ZIP Code. Unlike losses paid, incurred losses reflect the total value of losses that an insurer incurs during a given period, regardless of whether the losses have been paid out (i.e., it includes reserves), and is used to estimate total losses for a given year. FIO will analyze trends in incurred losses (including on a per-claim basis) by ZIP Code. FIO also will use this field to look at trends by ZIP Code in incurred-loss ratios (by dividing by premiums) to better understand how underwriting metrics may reflect weather-related events.
The Cumulative Number of Claims Closed With Loss Payment field is necessary because the average amount insurers pay for each claim will provide insight on the impact of an event (or events) in a given area, helping FIO to identify exposure frequency and severity. /18/ During the underwriting process, an insurer must gauge the average value it will pay out per claim. /19/ Historically, the average cost of claims has been one of the primary factors behind the price increases and the tightened availability of homeowners insurance. /20/ FIO will be evaluating claims frequency and severity on a nationwide basis to see if they are associated with average premiums growth or a decrease in the availability of homeowners insurance. This data field will thus enable FIO to better understand how underwriting metrics may reflect weather-related events.
FOOTNOTE 18
FOOTNOTE 19AM Best, Best's Guide to Understanding the Insurance Industry (2023), 6, https://web.ambest.com/information-services/sales-information/best-s-guide-to-understanding-the-insurance-industry. END FOOTNOTE
FOOTNOTE 20See
The seven data fields described above include three data fields not collected by State Insurance Regulators (the number of policy in-force exposures; the number of policies not renewed or retained; and the total dollar value of coverage for dwelling, other structures, personal property, and loss of use). The seven data fields also include four fields to collect ZIP Code level information nationwide regarding premiums, claims, and losses that correspond to four state-level data fields reported by
Reporting Framework
The Data Collection Form and accompanying instructions now clarify that Representative Sample Insurers should use accident year reporting basis for loss- and claims-related data and calendar year reporting basis for premium-related data and policy information. /21/ This change to the instructions provides clarity on alignment with the format of statutory filings; there is no fundamental change.
FOOTNOTE 21 Insurance information may be reported on either a calendar year or an accident year basis, depending on the type of information being reported. Accident year reporting monitors loss development of a claim over time (and typically includes losses when they occur, not when they are reported). For example, if a hurricane occurs in 2017, then 2017 would be the accident year. Losses and claims associated with the hurricane could occur in 2017 but could also develop into subsequent years as policyholders submit claims and receive payments over time but would be reported for the 2017 accident year. On the other hand, calendar year reporting does not change or develop over time beyond the calendar year. For example, premiums based on a 2017 calendar year would include premiums from
Reporting Period
FIO seeks to collect six years of underwriting data, 2017 through 2022 (Reporting Period). This is a one-year expansion over the Reporting Period proposed in the
Geographic Scope and Granularity
FIO will collect data at a ZIP Code level for all
FOOTNOTE 22See, e.g.,
Collection Process
Data will be collected from the Representative Sample Insurers on the Data Collection Form, which is a revised version of the template discussed in the
Changes in Data Collection Based on Comments and Feedback Received
In response to the
Based on the public comments and stakeholder feedback, FIO has revised several aspects of its data collection, including the scope of the forms included in the homeowners insurance multi-peril line of business, the selection of insurers, the number of data fields, and the reporting period for the collection. FIO also revised the instructions for the Data Collection Form to clarify how the data should be reported, such as indicating that premium-related data and policy information should be provided on a calendar year basis and requiring all claims and losses to be reported, not just weather-related claims and losses. These changes, taken together, should lessen the burden on the insurers while also enhancing FIO's analyses.
Revised Focus Within Homeowners Line of Business
FIO has revised its data collection to focus only on the owner-occupied homeowners multi-peril policy form known as HO-3. In response to the
Revised Data Fields
Based on the comments received and FIO's decision to narrow the scope of the data collection, FIO removed eight of the fifteen data fields proposed in the
Revised Insurer Selection
FIO did not receive many comments related to the proposed methodology for selecting the insurers for the proposed data collection, although it did receive comments on the overall burden of the proposed data collection, as well as on the potential use of the data for entity-specific analyses, and the operational burden of having groups report their subsidiaries on separate templates. In the
Although FIO did not receive many specific comments on the selection of insurers, FIO is changing the selection criteria to cover only the largest homeowners insurance groups, i.e., those with 1 percent or more of the
Revised Reporting Period
FIO is increasing the reporting period from the proposed five years (2017-2021) to six years (2017-2022) because expanding the reporting timeframe by one additional year will allow FIO to capture the impact of recent climate-related disasters, including Hurricanes Ian and Nicole. A number of commenters supported a longer reporting period, although many of these called for adding multiple additional years. The overall burden for the Representative Sample Insurers will not increase, because FIO is removing eight of the fifteen data fields that it proposed in the
No Change to Geographic Scope or Granularity
FIO received many comments on the proposal to collect data at the ZIP Code level, both for and against. /23/ FIO plans to move forward with ZIP Code level collection. As many commenters noted, state-level data would be insufficient for FIO's analysis because climate-related risks and socioeconomic factors vary across geography, and state-level trends could differ from trends seen on a more granular level. While FIO understands the potential additional benefits of collecting census tract level data relative to ZIP Code information, FIO's discussions with insurers and other stakeholders leads FIO to conclude that ZIP Code information tends to be collected by insurers as part of the address in a homeowners policy, while other geographic information, such as census tracts, may not be collected by insurers. Consequently, collecting data at a census tract level could increase the burden on insurers to produce information at that granularity. FIO believes that ZIP Code collection most appropriately balances the need for granular data with the responsibility to minimize collection burden.
FOOTNOTE 23 Commenters that opposed ZIP Code level collection cited, among other things, the burden to insurers, the potential for misleading conclusions based on ZIP Code level claims data, and the possibility of exposing personally identifiable information or proprietary data in ZIP Codes with few policies. Those in favor of granular data collection tended to encourage FIO to collect data at an even finer granularity than ZIP Code, with census tract being the most common unit proposed. Those that preferred census tracts cited various rationales, including that they are comparable, have similar numbers of residents, tend to be internally similar, and align with census-defined geographies better than ZIP Codes. END FOOTNOTE
Revised Instructions
FIO has revised the instructions for the Data Collection Form relating to the data fields. The proposed template instructions provided with the
FOOTNOTE 24 "Facts + Statistics:
Revised Burden Estimate
FIO received many comments, including in follow-up stakeholder engagements, regarding its burden estimates, including the number of hours estimated (hour burden) and average salary used (hourly rate). Multiple comments stated that the hour burden estimate was too low and that the hourly rate should be higher to reflect the need for subject matter experts in actuarial and finance roles to respond to the collection. Other commenters supported FIO's estimate and emphasized that the importance of the information collected outweighed the burden.
FIO has revised its estimate of the hour burden to reflect that the data will be collected for: (1) only seven data fields, not the 15 data fields originally proposed; (2) only one policy form of homeowners insurance, not six as originally proposed; (3) one additional year, 2022, beyond the original proposed five years (2017-2021); and (4) the change in insurer selection criteria. /25/
FOOTNOTE 25 The Representative Sample Insurers encompass 240 homeowners insurance entities, which is more than the 213 entities that would have been covered under the selection criteria outlined in the
FIO updated the estimated hourly rate to reflect the salary and benefit increases between
FIO estimates the annual burden for its data collection is between 14,400 and 48,000 hours at a total cost of
FOOTNOTE 26 FIO estimates that each individual homeowners insurance entity within a Representative Sample Insurer will take between 60 and 200 hours total to collect the requested data for six years (2017 to 2022). The 14 Representative Sample Insurers have 240 homeowners insurance entities (with the number of entities per group ranging from 1 to 44, so the burden for each Representative Sample Insurer would vary). The overall estimated burden hours are 14,400 (240 entities x60 hours) to 48,000 (240 entities x200 hours). The average fully loaded hourly rate for insurance employees in
FOOTNOTE 27 Data on revenues for the 13 groups was derived from
Figure 2-Comparison of Burden Estimates
October 2022 FRN Current
estimates
Hours per homeowners insurance entity 100 to 350 60 to 200
Total hours for all Representative Sample Insurers 21,300 to 74,550 14,400 to 48,000
Hourly rate $ 54.27 $ 58.30
Total cost for all Representative Sample Insurers $ 1,155,951 to $ 4,045,829 $ 839,520 to $ 2,798,400
Analysis of Data Collected
FIO currently plans to analyze the data collected using trend or time-series analysis. In the time-series analysis, FIO will assess trends in underwriting, claims, and loss metrics, normalized on a per-policy, premium, or coverage basis to allow for comparison across ZIP Codes, for owner-occupied homeowners multi-peril (HO-3 form) policies over the last six years. In addition to the data collected on the Data Collection Forms, FIO's analysis will rely on several types of data that may include, but are not limited to, publicly available insurance information such as residual market information, information on the relative risks that locations face from climate-related events, and data used to control for other changes in a ZIP Code that could influence insurance markets (e.g., inflation, real estate values, or changes in population). At a later stage, FIO may consider using additional methodologies, including multivariate statistical analysis.
Submission of Data
Reporting under this data collection would be mandatory for all Representative Sample Insurers. If OMB approves this data collection, the Representative Sample Insurers will be expected to submit the completed Data Collection Form through a secure
FIO intends to provide training and additional resources within the data collection period to facilitate the proper completion of reporting templates.
Given the potential sensitivity of some of the requested data, FIO will seek to maintain the data submitted in a confidential manner. The FIO Act includes provisions addressing the privacy or confidentiality of submissions of non-publicly available data and information to FIO. /28/ In accordance with the FIO Act, submissions pursuant to this data collection will not constitute a waiver of, or otherwise affect, any privilege arising under federal or state law to which the data or information is otherwise subject. /29/ FIO expects that data it receives under this collection will likely contain or consist of "trade secrets and commercial or financial information obtained from a person and privileged or confidential." This type of information is subject to withholding under exemption 4 of the Freedom of Information Act. /30/
FOOTNOTE 28 31 U.S.C. 313(e)(5). END FOOTNOTE
FOOTNOTE 29 31 U.S.C. 313(e)(5)(A). END FOOTNOTE
FOOTNOTE 30 5 U.S.C. 552(b)(4). END FOOTNOTE
All data collection is expected to be completed through a secure portal maintained by
Form: FIO Climate Data Collection:
Affected Public: Businesses and other for-profit institutions and not-for-profit entities.
Estimated Number of Respondents: 14.
Frequency of Response: On occasion, although FIO aims to conduct annual data collections.
Estimated Total Number of Annual Responses: 14.
Estimated Time per Response: Varies from 60 hours to 8,800 hours depending upon the number of homeowners insurance entities within a respondent group. The estimated total annual burden hours are 60 to 200 hours per homeowners insurance entity within a respondent group. The number of homeowners insurance entities within a respondent group varies from 1 to 44, with the average number being 17. Thus, the average estimated time per response ranges from 1,020 hours to 3,420 hours.
Estimated Total Annual
Authority: 44 U.S.C. 3501 et seq.
Treasury PRA Clearance Officer.
[FR Doc. 2023-24248 Filed 11-1-23;
BILLING CODE 4810-AK-P
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