Greenlining Institute Issues Public Comment to Treasury Dept.

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WASHINGTON, Dec. 26 -- The Greenlining Institute has issued a public comment to the U.S. Department of the Treasury. The comment was written and posted on Dec. 20, 2022.

The comment, on Docket No. TREAS-DO-2022-0021-0001, was sent to Elizabeth Brown, senior insurance regulator policy analyst.

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On behalf of The Greenlining Institute, we appreciate the opportunity to provide comments to the Federal Insurance Office (FIO) regarding the proposal on data collection on climate-related financial risks ("proposal").

Founded in 1993, The Greenlining Institute ("Greenlining") is committed to building a just economy that is inclusive, cooperative, sustainable, participatory, fair, and healthy. We work towards a future where communities of color can build wealth, live in healthy places filled with economic opportunity, and are ready to meet the challenges posed by climate change. Our multifaceted advocacy efforts address the root causes of racial, economic, and environmental inequities in order to meaningfully transform the material conditions of communities of color in California and across the country.

Climate change is a risk multiplier that exacerbates racial and economic inequality, and it is progressing at an alarming rate. Economic damages caused by climate-related disasters, as well as chronic issues resulting from climate change such as heat stress, flooding, and drought, create disproportionate burdens for low- and moderate-income (LMI) communities and communities of color. Across the country, insurers that fueled the climate crisis with their underwriting and investment decisions are now scrambling to protect their profits at the expense of communities harmed by climate-related disasters like hurricanes, torrential thunderstorms, and wildfires. If these trends continue, the combination of a climate crisis and an insurance industry retreat could create an affordability crisis that threatens the well-being and livelihoods of already vulnerable regions.

We support FIO's goal to collect consistent, comparable, and granular data in order to effectively evaluate how climate change is harming insurance consumers and to fulfill FIO's mandate to evaluate impacts on minority and LMI communities. The proposal represents a strong step forward in understanding this landscape and its impacts on climate vulnerable communities. To better achieve this goal, we recommend that FIO expand the proposal to capture data on additional residual market facilities and on climate-related perils that may be excluded from multi-peril homeowners insurance.

Below we offer specific recommendations for how the proposal can be further strengthened to ensure adequate information is collected to best understand impacts to vulnerable communities that bear a disproportionate burden of climate change. Additionally, we list some key recommendations based on Greenlining's participation in the California Climate Insurance Working Group, which offer insight into the California experience and how to ensure insurance markets work for those most vulnerable.

1) FIO should collect data on additional types of insurance.

By focusing specifically on homeowners' multi-peril insurance policies, FIO will miss an opportunity to gather critical information and data on other lines of insurance more likely to be utilized by climate vulnerable communities. Further, FIO is also likely to miss collecting data from communities beginning to feel the effects of "bluelining" - where access to capital, including insurance and mortgage lending, is impacted because of the threat of climate impacts. To remedy this, FIO should collect data on additional types of insurance in order to fully capture a comprehensive picture of the market. This should include data related to customers accessing state residual markets, including plans like those for fire in California and flood in Florida. Further, this should include both condominium and renters insurance as well as fire and flood insurance.

2) FIO should collect data granular enough to examine potential redlining in access to insurance.

We support FIO's proposal to collect data at the ZIP code level, as well as the five year time horizon from 2017 to 2021. This should allow for the ability to see if there are trends of neighborhoods, especially low-income neighborhoods and neighborhoods of color, seeing changes in insurance access. We further recommend that FIO collect this data on an annual basis in order to best assess potential linkages between climate-related disasters and subsequent access to insurance. Lastly, we recommend adding data related to claim denials and policy cancellations. These indicators are critical to understanding the changing insurance market, and potential redlining of entire vulnerable communities, in the face of the climate crisis.

3) FIO should use the collected data and resulting analysis to inform recommendations to regulators and legislators on how to protect vulnerable communities.

Once this information is compiled, FIO should take seriously its role in disseminating findings and addressing disparities that may be found. To this end, FIO should publicly publish data from this effort to allow stakeholders to conduct further analysis. FIO should also publish a summary report and present findings to relevant staff and leadership at the Department of Treasury, as well members and subcommittees of the Financial Stability Oversight Council. FIO should further engage state insurance offices with findings and results, and lead discussions about closing gaps for vulnerable communities.

Additionally, based on Greenlining's participation in the California Climate Insurance Working Group, we offer the following recommendations for FIO's consideration. These are adapted from recommendations outlined in the Group's 2021 report Protecting Communities, Preserving Nature, and Building Resiliency: How First-of-Its-Kind Climate Insurance Will Help Combat the Costs of Wildfires, Extreme Heat, and Floods, which recognizes that California must both reduce climate risk impacts and improve recovery after climate-intensified disasters.

* Assess Value and Opportunity of Risk Reduction Measures: FIO should work with local governments, insurance companies, and others to develop better data collection on the loss experience of homes that have employed risk reduction measures to accelerate the development of performance-based mitigation measures. FIO should consider a specific survey of insurance companies to gather data on homes that have taken mitigation actions, such as home hardening, as well as compile current mitigation discounts being offered by insurance companies to their policyholders. FIO could leverage this process to develop better data collection and analysis tools to inform the planning of new and rebuilt structures.

* Support Uptake of Renters Insurance: FIO and relevant federal agencies should prioritize increasing the uptake of renters insurance throughout the country. To this end, FIO should launch an analysis of renters insurance uptake across the country and use that data to develop a public outreach program for renters vulnerable to moderate to high flooding, wildfire, and other climate-related risks. Insurance companies should consider the costs and payment requirements associated with including a limited amount of funding for evacuation or post-disaster rental costs in renters policies. Further, subsidies and financial assistance should be a component of such a campaign to ensure the most vulnerable customers have access to this critical resource.

* Consider Parametric and Community Insurance: To reduce financial stress, risk transfer policies and public-private partnerships need to be developed now in order to be in place to meet the future demands of surging costs. A parametric insurance model, for example, should be explored. Such a model could increase the speed at which disbursements reach governments by relying on a set "trigger" based on reliable data to quickly release payments. However, potential risks with parametric insurance models could include being cost-prohibitive for under-resourced communities and challenges related to the trigger not covering the full amount of loss suffered. FIO should consult with independent experts and the National Association of Insurance Commissioners (NAIC) to initiate concepts for parametric and community insurance pilot projects that consider both opportunities and potential coverage gaps and risks.

* Advance Mitigation Models: FIO should work with other federal agencies to identify optimal opportunities for investments in mitigation strategies. FEMA's Building Resilient Infrastructure and Communities (BRIC) program may be crucial to funding the resulting mitigation strategies and empower local communities to develop mitigation ideas for their specific area.

The proposed data collection and report represents an important step toward evaluating a growing crisis for insurance consumers and providing recommendations for solutions. But to capture the risks facing vulnerable communities, FIO should collect additional data and maximize its authority and convening ability to consider a new paradigm of climate-smart insurance. Once again, we appreciate this opportunity to provide comment on the proposal and look forward to its final adoption.

Sincerely,

Sona Mohnot, Climate Equity Associate Director, The Greenlining Institute, [email protected]

Monica Palmeira, Climate Finance Strategist, The Greenlining Institute, [email protected]

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Original text here: https://downloads.regulations.gov/TREAS-DO-2022-0021-0029/attachment_1.pdf

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com