Approximately 110 Connecticut-based insurance companies are now required by the state to complete the annual Climate Risk Disclosure Survey, something that previously had been voluntary, which insurer trade groups said will cost them time and money.
State Insurance Commissioner Thomas Leonardi made the announcement July 17, making his state the fifth to make the survey report mandatory. In Connecticut, the mandatory report will be filed by about 110 companies that write annual premiums of more than $100 million nationwide and who are either domiciled or licensed in Connecticut. The filing deadline is Aug. 30.
Industry officials dislike the requirement. Robert Detlefsen, vice president, public policy at the National Association of Mutual Insurance Companies, told Bests News Service the forms will cost many insurers in Connecticut considerable time and money over the next six weeks to beat a tight deadline. Most of them have not thought about it and for good reason the kinds of questions they're being asked are not really germane to the business of insurance.
Detlefsen said the form asks difficult questions of insurers, including what they are doing to engage stakeholder groups on the subject of climate change. We don't think it's appropriate for insurers to be expected to do that, he said. The idea of having to provide information about climate change a process that operates over a long period of time is very different from being asked what steps [they] are taking to mitigate a specific risk such as a wildfire. Climate change doesn't sit within the category of insurable risk, he said.
The survey asks questions that are designed to help policyholders mitigate potential losses, identifying geographical areas of business or risk and describing the use of computer modeling. Also, carriers are asked to provide a summary of any climate-related policy their company has regarding investment management.
The Climate Risk Survey had initially been adopted in 2009 by the National Association of Insurance Commissioners, with the report made on a voluntary basis. But following NAIC's vote states such as Indiana opted not to require the survey to be filed (Best's News Service, Jan. 14, 2010). Connecticut also had given companies discretion to file after 2009, but had not pushed them to do so afterward. Some companies continued to file, and some didn't, said George Bradner, director of the Connecticut Insurance Departments Life and Health Division.
The move was made in response to the increasing number of major weather-related claims events that have hit Connecticut in recent years, Bradner told Bests News Service. The occurrence of three 1-in-100-year storms during a 14-month period caused the change toward a mandatory filing. Bradner mentioned hurricanes Irene and Sandy, as well as a severe winter storm in 2013 and several tornadoes this summer, as among the disasters that helped push the state to require the Climate Risk Survey.
Connecticut will be using the same survey as the four other states with a mandatory filing requirement, but cut the premium threshold requirement to file a survey from the $300 million in property/casualty, life and health insurance limit to $100 million. We just felt that a broader net needed to be cast to find out what the industry was doing as a whole, Bradner said.
David Kodama, senior director of research and policy analysis for the Property Casualty Insurers Association of America, said insurers will have a difficult time meeting the deadline for the survey given the depth and breadth of it's questions. Part of the survey asks insurers to provide information on whether or how they are investing resources to combat climate change, information about which only some companies may be able to offer.
Kodama said the survey itself is unique because the insurance industry is the only one that must file one, despite insuring the risk regardless of what is causing it. He said while there has been an increase in severe weather during the past decade, the industry's track record shows that it is financially prepared to handle claims.
Until Connecticut's decision, California, New York, Washington and most recently Minnesota were the only states with mandatory climate risk survey reporting requirements, with the filing in all but Minnesota applying to those companies that write more than $300 million in premium. Connecticut's $100 million premium threshold the level also set in Minnesota is expected to double the number of responses in Connecticut.
Bradner was unsure whether Connecticut's action would result in more states that have increasing recurrences of catastrophic weather events making the filing mandatory. We hope that it's the beginning of a conversation, he said. It's apparent to us that 1-in-100-year events are happening more frequently.