Debate Over NAIC Climate Risk Disclosure Heating Up

Other states, including Alabama, Utah, South Carolina, Connecticut and Mississippi, may follow Indiana's lead and not distribute the NAIC survey to insurers.

By ANGELA CHILDERS, a freelance writer based in Chicago

When the National Association of Insurance Commissioners (NAIC) last year finalized its mandate that state regulators administer the organization's Insurer Climate Risk Disclosure Survey, one could assume any lingering deliberations had been laid to rest.

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After all, the commissioners unanimously approved NAIC's decision to question insurance companies with annual premiums of $500 million or more about their company's effects on climate change at its spring meeting in March 2009.

Now, however, some commissioners are questioning their prior vote of confidence in the NAIC's decision to track environmental impact. The Indiana Department of Insurance, for example, has informed the organization that it will not distribute the survey to the state's insurers.

In addition, Alabama's insurance commissioner hasn't decided if he will require insurance companies to complete the document. Insurance commissioners from Utah, South Carolina, Connecticut and Mississippi are reportedly deliberating whether to go the way of Indiana or comply with NAIC.

Alabama Insurance Commissioner Jim Ridling said that senior staff members are reviewing the survey before making any recommendations.

"If we're going to collect data, then we need to know what we're doing and why we're doing it," he said. "Do we know what we're asking, and what are we to do with it when we get responses? Those are valid questions."

FACT-FINDING SURVEY OR POLITICAL PIECE?

According to published reports, Indiana Gov. Mitch Daniels ordered the insurance department to forgo the survey. Nancy Wilkins, assistant to the Indiana insurance commissioner, declined to comment.

Pennsylvania Commissioner Joel Ario, chairman of NAIC's Climate Change and Global Warming Task Force, confirmed that Indiana does not intend to distribute the survey.

Although Ario won't speculate on whether any other states will follow Indiana's lead, he said that he is surprised that this survey, modeled after the Carbon Disclosure Project, moved from a fact-gathering endeavor to a political debate on climate change.

"Insurance regulation is not usually a politicized thing," Ario said. "This survey does not speak to the issue of whether climate change is a man-made problem."

Rather, the mission of the climate change survey is to make public some of the decisions large insurers are making and their impact on the environment, he said.

Could it perhaps be that the insurance companies are engaged in some heavy-handed lobbying against state insurance departments?

Representatives from the National Association of Mutual Insurance Companies (NAMIC) have opposed the survey, arguing that the questions are "inappropriate" and not based on verified climate data.

Robert Detlefsen, NAMIC's vice president of public policy, speculated that, although NAIC members unanimously agreed to the survey in March 2009, now that each state is faced with the May 1, 2010, survey submission deadline, they're taking a closer look. In addition, recent headlines accusing researchers of falsifying weather data are leading others to question the validity of climate change altogether.

"I think there are a bunch of unresolved questions about catastrophic, anthropogenic global warming," Detlefsen said. "This survey assumes that we do have answers to those questions."

He predicted more states will hesitate to administer the survey for fear that it could be "perceived as tantamount to an endorsement" of catastrophic global warming theories and make it more difficult for states to take a stance against other environmental legislation such as the so-called Carbon Cap-and-Trade bill passed in the House (and awaiting action in the Senate).

Detlefsen praised the Securities and Exchange Commission's take on the issue, which decided in late January to provide public companies with guidance on including climate change among the risks disclosed as part of their 10-K filings.

"The NAIC is demanding that companies answer specific questions about climate risk ... the questions are quite tendentious," he argued.

Ario dismissed the notion that the questions were intrusive. Anyone who reviews the survey questions, he said, will find them "very general in nature" and that they do not require insurers to release any information that could be considered proprietary.

February 8, 2010

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