Insurance companies are facing growing scrutiny over their preparedness for climate change, an issue that could potentially affect insurance affordability and availability.
“I’m very pleased to see more states joining this effort,” said Washington Gov. Jay Inslee. “Being prepared is clearly in the best interests of both insurers and the families and businesses they insure.”
Last year, insurance regulators in Washington, California and New York surveyed major insurers about what steps they’re taking to address risks to their underwriting and investment portfolios. This year, regulators in Connecticut and Minnesota have also joined the survey.
“Climate change is a potential game-changer for insurers,” said Washington Insurance Commissioner Mike Kreidler. “We want to make sure that this issue is on their radar.”
Climate change poses a double challenge to insurers. Extreme weather events and droughts, for example, can sharply increase claims. Climate-related issues could also have a significant effect on insurers’ investments, potentially affecting their long-term ability to pay claims.
“Unprepared insurers are much more likely to simply pull out of markets, leaving homeowners and businesses struggling to find alternative coverage,” said Kreidler, who chairs the National Association of Insurance Commissioners’ working group on climate change. “And when insurers abandon a market, government tends to end up as the insurer of last resort.”
Kreidler’s office has been surveying insurers on this issue since 2008.
“I wish some companies were further along,” said Kreidler, “but I’m encouraged to see that a growing number of companies are taking steps to incorporate climate change into their risk modeling and investment considerations.”
For a look at past surveys and responses for Washington, California and New York, please see California’s Climate Risk Disclosure Survey web page.