Introducing a new layer of federal oversight would neither enhance nor standardize the climate-related disclosures US insurers make to their investors, the Insurance Information Institute (Triple-I ) said Friday in a letter to the US Securities and Exchange Commission.
Triple-I sent the letter in response to the SEC’s request for public comment on its proposed rulemaking for enhancing and standardizing climate-related disclosures for investors.
“The US property and casualty industry supports and can play a constructive role in advancing transparency around weather- and climate-related risks,” wrote Sean Kevelighan, Triple-I CEO, and Dale Porfilio, chief insurance officer. “Indeed, as financial first responders, insurers have a strong ethical and financial interest in facilitating the transition to a lower-carbon economy and in promoting resilience during that transition. However, adding a new layer of federal oversight to the existing regulatory structure would complicate insurer operations while providing little to no benefit toward reducing greenhouse gas emissions and adapting to near-term conditions and perils.”
The US insurance industry is regulated in more than 50 jurisdictions and receives more governance and regulatory oversight than any other type of financial service, Triple-I said. More than 80% of insurers’ investments are in fixed-income – mostly municipal – securities.
“The SEC’s effort overlaps significantly with those of other entities – e.g., the National Association of Insurance Commissioners (NAIC) and the states that regulate insurance, as well as the Treasury Department’s Federal Insurance Office (FIO),” Kevelighan and Porfilio wrote. “Assessing Scope 3 emissions would be particularly onerous for insurers due to the fact that they cover diverse personal and commercial assets and activities, over which they have no control – further, there is currently no accepted methodology for insurers to measure their underwriting-related Scope 3 emissions, which makes the SEC’s proposed requirement premature for our industry.”
Scope 3 emissions are the result of activities from assets that are neither owned nor controlled by the reporting organization, according to the Environmental Protection Agency.
In its letter to the SEC, Triple-I recommended that the NAIC climate risk disclosure survey serve as the primary reporting regime for all insurers, which would allow for consistent enforcement across ownership structures – public, private and mutual – while avoiding what the organization said was “unnecessary complexity and expenses.”
“Property and casualty insurers are no strangers to climate and extreme-weather risk,” Kevelighan and Porfilio wrote. “We may not always have talked about the issue in those terms, but our industry has long had a financial stake in the issue. Consider the fact that insured losses caused by natural disasters have grown by nearly 700% since the 1980s, and that four of the five costliest natural disasters in US history occurred over the past decade. The industry is committed to disclosure of climate-related exposures, as such information will be integral to insurers’ ability to accurately and reliably underwrite such risks and make better-informed investment decisions.”