Page 27 - Insurance Times February 2022

supervision and regulation of insurers, including as part of 2. The degree to which insurers' business models could be
the FSOC's analysis of financial stability, and to further affected by each category of risk and the relevant time
assess, in consultation with states, the potential for horizons for such effects.
major disruptions of private insurance coverage in regions
of the country particularly vulnerable to climate change In the process, identifying and assessing:
impacts".
Y The key structural issues that could inhibit the ability of
insurance supervisors to assess and manage climate-
The FIO intends to initially focus on the three
related financial risk in the insurance sector (for
following climate-related priorities, in particular: example, accounting frameworks and other standards).
1. Insurance supervision and regulation: Assess climate-
Y The barriers that could inhibit the integration of
related issues or gaps in the supervision and regulation
climate-related financial risks into insurance regulation.
of insurers, including their potential impacts on US
financial stability. Y The efforts of insurers - through their underwriting
2. Insurance markets and mitigation/resilience: Assess the activities, investment holdings and business operations
potential for major disruptions of private insurance - to meet the US's climate goals, including reaching net-
coverage in US markets that are particularly vulnerable zero emissions by 2050.
to climate change impacts, and facilitate mitigation and Y What role or actions states might take to encourage
resilience for disasters. Also, assess the availability and the insurance sector's transition to a low-emissions
affordability of insurance coverage in high-risk areas, environment and an adaptive and resilient economy?
particularly for traditionally underserved communities
and consumers, minorities and low/moderate-income The scorecard urgency
persons.
Bloomberg Green recently noted: "The clock is ticking for
3. Insurance sector engagement: Increase its engagement banks, insurers and asset managers [that are] still providing
on climate-related issues and take a leadership role in support to oil, gas and coal producers. It's not just the moral
analysing how the insurance sector may help mitigate imperative - that fossil-fuel use is destroying the atmosphere
climate-related risks.
and life on Earth with it. It's that their financial health
requires leaving such companies behind."
Insurance supervision and regulation

set for a sea-change Meanwhile, Sonia Hierzig, head of financial sector research
How should the FIO identify and assess climate-related issues at ShareAction, warned: "It is baffling that most insurance
or gaps in the supervision and regulation of insurers, including companies still seem happy to invest in companies or
their potential impact on financial stability? In seeking provide insurance for projects that continue to fuel this crisis.
answer to this, the FIO wishes to address: Insure Our Future's most recent scorecard on insurance, fossil
(a) Prudential concerns fuels and climate change found that insurers in the US, east
(b) Market conduct regarding insurance products and Asia and the Lloyd's market, particularly, continue to support
services this sector with few restrictions - despite its clear
incompatibility with the goals of the Paris Agreement."
(c) Consumer protection.

The FIO also wishes to assess the effectiveness of US state The US is world's largest greenhouse gas emitter. Now,
insurance regulatory and supervisory policies in addressing standing on the verge of running out of carbon budget, US
and managing climate-related financial risks with regard to insurers need to abandon their fossil-fuel fixation. Would the
the threat they may pose to US financial stability. This would FIO be able to make that happen? The intent seems right
include identifying: and as of now, it appears to be getting into the driver's seat.
1. The major channels through which climate-related
physical, transition, and/or liability risks may impact the (With the permission of the author
stability of the US insurance market Source: www.thediversityblog.com.)

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