[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48814-48819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18713]


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DEPARTMENT OF THE TREASURY


Federal Insurance Office Request for Information on the Insurance 
Sector and Climate-Related Financial Risks

AGENCY: Federal Insurance Office, Departmental Offices, Department of 
the Treasury.

ACTION: Request for Information.

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SUMMARY: The Federal Insurance Office (FIO) of the U.S. Department of 
the Treasury (Treasury) is issuing this Request for Information (RFI), 
following the May 20, 2021 Executive Order on Climate-Related Financial 
Risk, to solicit public input on FIO's future work relating to the 
insurance sector and climate-related financial risks. FIO's efforts 
will focus on three initial climate-related priorities, which are 
described below. Additionally, this RFI seeks input on how FIO's data 
collection and dissemination authorities can best be used by FIO in 
support of these priorities, as well as to monitor and assess the 
insurance sector and climate-related financial risks.

DATES: Submit written comments on or before November 15, 2021.

ADDRESSES: Submit comments electronically through the Federal 
eRulemaking Portal at http://www.regulations.gov, in accordance with 
the instructions on that site, or by mail to the Federal Insurance 
Office, Attn: Elizabeth Brown, Senior Insurance Regulatory Policy 
Analyst, <a href="/cdn-cgi/l/email-protection#b2f7dedbc8d3d0d7c6da9cf0c0ddc5dcf2c6c0d7d3c1c7c0cb9cd5ddc4"><span class="__cf_email__" data-cfemail="88cde4e1f2e9eaedfce0a6cafae7ffe6c8fcfaede9fbfdfaf1a6efe7fe">[email protected]</span></a>, (202) 597-2869, Room 1410 MT, 
Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 
20220. Because postal mail may be subject to processing delays, it is 
recommended that comments be submitted electronically. If submitting 
comments by mail, please submit an original version with two copies. 
Comments should be captioned ``FIO Insurance Sector and Climate-Related 
Financial Risks.'' In general, Treasury will post all comments to 
www.regulations.gov without change, including any business or personal 
information provided such as names, addresses, email addresses, or 
telephone numbers. All comments, including attachments and other 
supporting materials, are part of the public record and subject to 
public disclosure. You should submit only information that you wish to 
make available publicly.

FOR FURTHER INFORMATION CONTACT: Steven Seitz, Director, Federal 
Insurance Office, <a href="/cdn-cgi/l/email-protection#0e5d7a6b786b60205d6b677a744e7a7c6b6f7d7b7c7720696178"><span class="__cf_email__" data-cfemail="abf8dfceddcec585f8cec2dfd1ebdfd9cecad8ded9d285ccc4dd">[email protected]</span></a>, (202) 531-0915; Stephanie 
Schmelz, Deputy Director, <a href="/cdn-cgi/l/email-protection#e3b09786938b828d8a86cdb0808b8e868f99a3979186829096919acd848c95"><span class="__cf_email__" data-cfemail="c497b0a1b4aca5aaada1ea97a7aca9a1a8be84b0b6a1a5b7b1b6bdeaa3abb2">[email protected]</span></a>, (202) 341-
5258; Elizabeth Brown, Senior Insurance Regulatory Policy Analyst, 
<a href="/cdn-cgi/l/email-protection#f5b0999c8f949790819ddbb7879a829bb5818790948680878cdb929a83"><span class="__cf_email__" data-cfemail="c580a9acbfa4a7a0b1adeb87b7aab2ab85b1b7a0a4b6b0b7bceba2aab3">[email protected]</span></a>, (202) 597-2869 or Bret Howlett, Senior 
Insurance Regulatory Policy Analyst, <a href="/cdn-cgi/l/email-protection#1d5f6f78693355726a717869695d696f787c6e686f64337a726b"><span class="__cf_email__" data-cfemail="03417166772d4b6c746f66777743777166627076717a2d646c75">[email protected]</span></a>, (202) 
570-3916. Persons who have difficulty hearing or speaking may access 
these numbers via TTY by calling the toll-free Federal Relay Service at 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

Background

The Insurance Sector and Climate-Related Financial Risks

    The Intergovernmental Panel on Climate Change (IPCC) reported this 
year that ``[h]uman-induced climate change is already affecting many 
weather and climate extremes in every region across the globe. Evidence 
of

[[Page 48815]]

observed changes in extremes such as heatwaves, heavy precipitation, 
droughts, and tropical cyclones, and, in particular, their attribution 
to human influence, has strengthened since [2013].'' \1\ The United 
States has experienced a dramatic increase in the frequency and 
severity of climate-related disasters with a corresponding increase in 
economic losses in the past 40 years.\2\ Economic growth combined with 
changing socioeconomic trends, such as urbanization and the migration 
patterns to areas at higher risk of climate-related disasters, are 
increasing the financial risks associated with the effects of climate 
change. The increased frequency and severity of climate-related 
disasters, as well as the magnitude of associated insured losses, 
highlight the significance of these climate-related financial risks and 
the role of insurers in responding to them.\3\ Additionally, some 
insurance consumers are increasingly unable to find affordable and 
available property insurance coverage in certain insurance markets.\4\
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    \1\ IPCC, Climate Change 2021: The Physical Science Basis--
Summary for Policymakers, 7 August 2021, SPM-10, https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf.
    \2\ See, e.g., Adam B. Smith, ``2010-2019: A Landmark Decade of 
U.S. Billion-Dollar Weather and Climate Disasters,'' NOAA 
Climate.gov Blog, January 8, 2020, https://www.climate.gov/news-features/blogs/beyond-data/2010-2019-landmark-decade-us-billion-dollar-weather-and-climate. FIO is using the term ``climate-related 
disasters'' to refer to the type of weather-related events (such as 
wildfires, floods, hurricanes, etc.) that may be produced or 
exacerbated by climate change, as distinct from non-weather related, 
natural events (such as earthquakes and tsunamis).
    \3\ Aon, Weather, Climate & Catastrophe Insight Annual Report 
2020 (2021), 9, https://www.aon.com/global-weather-catastrophe-natural-disasters-costs-climate-change-2020-annual-report/index.html?utm_source=region&utm_medium=africa&utm_campaign=natcat21 
(Aon 2020 Cat Insight Annual Report).
    \4\ See, e.g., Christopher Flavelle, ``Wildfires Hasten Another 
Climate Crisis: Homeowners Who Can't Get Insurance,'' New York 
Times, September 2, 2020, https://www.nytimes.com/2020/09/02/climate/wildfires-insurance.html; Emma Kerr, ``Here's How You're 
Already Paying for Climate Change,'' U.S. News & World Report, June 
10, 2021, https://money.usnews.com/money/personal-finance/spending/articles/heres-how-youre-paying-for-climate-change.
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    The impact of climate change also affects insurers through their 
broader role in financial markets. For example, the U.S. life insurance 
sector is one of the largest investors in the U.S capital markets, with 
over $4.7 trillion in investments held in general accounts at year-end 
2020.\5\ As owners of significant amounts of assets, insurers could be 
vulnerable to potential decreases in asset values arising from the 
transition towards a low-carbon economy.\6\
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    \5\ Best's Special Report: First Look: 12 Month 2020 Life/
Annuity Financial Results (March 23, 2021), https://www.businesswire.com/news/home/20210323005711/en/Best%E2%80%99s-Special-Report-U.S.-LifeAnnuity-Industry%E2%80%99s-Net-Income-Cut-Nearly-in-Half-in-2020.
    \6\ New York Department of Financial Services, An Analysis of 
New York Domestic Insurers' Exposure to Transition Risks and 
Opportunities from Climate Change (June 10, 2021), https://www.dfs.ny.gov/system/files/documents/2021/06/dfs_2dii_report_ny_insurers_transition_risks_20210610.pdf
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    More broadly, climate-related financial risks may present 
challenges to the stability of the financial system (of which the 
insurance sector is an important part) including as shocks that 
increase financial system vulnerabilities. In a 2020 report, the 
Financial Stability Board (FSB) described climate-related risks as 
falling into three categories:
    <bullet> Physical risks are ``the possibility that the economic 
costs of the increasing severity and frequency of climate-change 
related extreme weather events, as well as more gradual changes in 
climate, might erode the value of financial assets, and/or increase 
liabilities.'' \7\
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    \7\ FSB, The Implications of Climate Change for Financial 
Stability (November 23, 2020), 4, 16, https://www.fsb.org/wp-content/uploads/P231120.pdf (FSB Climate Change Implications 
Report).
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    <bullet> Transition risks can arise from the technological, market, 
and policy changes needed to adjust to a low carbon economy and their 
effects on the value of financial assets and liabilities. Depending on 
the nature, speed, and focus of these changes, transition risks may 
pose varying levels of financial and reputational risk to 
organizations.\8\
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    \8\ See FSB Climate Change Implications Report; Task Force on 
Climate-Related Financial Disclosures, Recommendations of the Task 
Force on Climate-related Financial Disclosures (June 15, 2017), 13, 
https://www.fsb-tcfd.org/publications/final-recommendations-report/.
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    <bullet> Liability risks may ``arise when parties are held liable 
for losses related to environmental damage that may have been caused by 
their actions or omissions.'' \9\
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    \9\ FSB Climate Change Implications Report.
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    The same FSB report described how these risks might affect 
financial stability and highlighted the potential for new risks 
introduced from the response of the global financial system to climate-
related shocks.\10\
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    \10\ FSB Climate Change Implications Report, 1.
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    An assessment of how climate-related financial risks may affect the 
insurance sector should consider physical risks, transition risks, and 
liability risks. More specifically, the assessment should include how 
the life and property & casualty (P&C) insurers' business models 
(including their underwriting activities, market activities, and 
investment activities) are affected by each category of risk.\11\
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    \11\ See, e.g., FSB Climate Change Implications Report, 23 
(noting that, if the materialization of climate related risks were 
to lead to large increases in insured losses from physical risks, 
this might reduce the degree to which households and companies could 
insure against these risks).
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    The lack of available data complicates the ability to conduct such 
assessments. Government and private sector stakeholders have noted the 
significant issues caused by the lack of available data to assess 
climate-related financial risk within the insurance sector.\12\ These 
stakeholders could all potentially benefit from high-quality, 
consistent, comparable, and reliable data for their risk management, 
disclosures, and forward plans to assess and address climate-related 
financial risks. State regulatory tools, such as the Own Risk and 
Solvency Assessment (ORSA), may capture data on some climate-related 
financial risks if they are recognized by a reporting insurer as having 
a material impact on its solvency over the next one to two years, but 
these tools may be inadequate to assess climate-related risks, 
particularly over a longer time horizon. Additionally, only six states 
have regularly collected from insurers certain limited, high-level 
qualitative data directly focused on climate-related financial 
risks.\13\ No federal authority is collecting climate-related financial 
data specific to the insurance sector.
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    \12\ FSB Climate Change Implications Report, 28; FSB and 
International Monetary Fund, The Financial Crisis and Data Gaps: G20 
Data Gaps Initiative (DGI-2) The Fifth Progress Report--Countdown to 
2021 in Light of COVID-19 (October 2020), 7, https://www.fsb.org/wp-content/uploads/P071020.pdf; International Association of Insurance 
Supervisors and Sustainable Insurance Forum, Application Paper on 
the Supervision of Climate-related Risks in the Insurance Sector 
(May 2021), 9, 12-13, 28, https://www.iaisweb.org/page/supervisory-material/application-papers/file/97146/application-paper-on-the-supervision-of-climate-related-risks-in-the-insurance-sector#; ``How 
Insurance Companies Can Prepare for Risk from Climate Change,'' 
Deloitte, https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-companies-climate-change-risk.html.
    \13\ National Association of Insurance Commissioners (NAIC) 
Center for Insurance Policy and Research, Assessment of and Insights 
from NAIC Climate Risk Disclosure Data (November 2020), 5-6, https://content.naic.org/sites/default/files/cipr-report-assessment-insights-climate-risk-data.pdf. The six states--California, 
Connecticut, Minnesota, New Mexico, New York, and Washington--use 
the Insurer Climate Risk Disclosure Survey developed by the NAIC. 
The states require survey completion only by insurers that are 
regulated by them and who annually report $100 million or more in 
premiums and annuity considerations.
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Executive Orders

    The President's May 20, 2021, Executive Order on Climate-Related

[[Page 48816]]

Financial Risk emphasizes the important role that the insurance sector 
can play in combatting climate change. It instructs the Secretary to 
task FIO ``to assess climate-related issues or gaps in the supervision 
and regulation of insurers, including as part of the [Financial 
Stability Oversight Council] FSOC's analysis of financial stability, 
and to further assess, in consultation with States, the potential for 
major disruptions of private insurance coverage in regions of the 
country particularly vulnerable to climate change impacts.'' \14\
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    \14\ Exec. Order No. 14,030 Sec.  3(b)(i), 86 FR 27967 (May 20, 
2021), https://www.federalregister.gov/documents/2021/05/25/2021-11168/climate-related-financial-risk.
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    The May 20 Executive Order complements the President's January 27, 
2021 Executive Order on Tackling the Climate Crisis at Home and Abroad, 
which set forth the Administration's policy to ``organize and deploy 
the full capacity of its agencies to combat the climate crisis to 
implement a Government-wide approach.'' The President's January 27 
Executive Order puts the climate crisis at the center of U.S. foreign 
policy and national security and seeks to ``put the United States on a 
path to achieve net-zero emissions, economy-wide, by no later than 
2050.'' \15\
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    \15\ Exec. Order No. 14,008 Sec.  201, 86 FR 7619 (January 27, 
2021), https://www.federalregister.gov/documents/2021/02/01/2021-02177/tackling-the-climate-crisis-at-home-and-abroad.
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FIO's Authorities

    Title V of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act established FIO within Treasury. FIO's statutory 
authorities include, among other things, monitoring all aspects of the 
insurance sector, including identifying issues or gaps in the 
regulation of insurers that could contribute to a systemic crisis in 
the insurance sector or the U.S. financial system. FIO's authorities 
also include monitoring the availability and affordability of insurance 
products for traditionally underserved communities and consumers, 
minorities, and low- and moderate-income persons.\16\ These segments of 
the population may be negatively and disproportionately impacted by 
climate change.\17\
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    \16\ 31 U.S.C. 313(c)(1)(A)-(B).
    \17\ See, e.g., Alexa Jay et al., ``Overview,'' in Impacts, 
Risks and Adaptation in the United States: Fourth National Climate 
Assessment (2018), 36, https://nca2018.globalchange.gov/downloads/NCA4_Ch01_Overview.pdf.
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    In addition, FIO is authorized to collect data and information on 
and from the insurance sector, including through the use of 
subpoenas.\18\ FIO is also authorized to analyze and disseminate data 
and information and issue reports on all lines of insurance, except 
health insurance.\19\
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    \18\ 31 U.S.C. 313(e)(6).
    \19\ 31 U.S.C. 313(e)(1).
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    Because climate change is a global phenomenon, FIO's international 
insurance statutory authorities can help achieve U.S. goals in this 
area. FIO is authorized to coordinate federal efforts and develop 
federal policy on prudential aspects of international insurance 
matters, including representing the United States, as appropriate, in 
the International Association of Insurance Supervisors (IAIS).\20\ 
Finally, the FIO Director also serves as a non-voting member of the 
FSOC.\21\ The May 20 Executive Order directs that FIO contribute to 
FSOC's analysis of financial stability related to climate change.\22\
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    \20\ 31 U.S.C. 313(c)(1)(E).
    \21\ 12 U.S.C. 5321(b)(2)(B).
    \22\ Exec. Order No. 14,030 Sec.  3(b)(i).
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FIO's Current Engagement on Climate-Related Issues

    FIO's role and statutory authorities enable it to take a leadership 
position in analyzing how the insurance sector may be impacted by, and 
help mitigate, climate-related risks. FIO is engaging with the NAIC and 
state insurance regulators through their work on climate-related 
topics.\23\ FIO also represents the United States at the IAIS, is a 
member of the UN's Sustainable Insurance Forum, and is a member of the 
Organisation of Economic Cooperation and Development's Insurance and 
Private Pensions Committee--all of which are increasingly focused on 
climate-related issues. In addition, FIO is discussing climate-related 
issues with insurance authorities in both the United States and the 
European Union through the EU-U.S. Insurance Project. FIO also 
represents Treasury in the federal Mitigation Framework Leadership 
Group, which is a national structure to coordinate disaster mitigation 
efforts across the federal government and with state, local, tribal, 
and territorial representatives. FIO is engaging with the Securities 
and Exchange Commission and other members of the FSOC on climate-
related financial risks. More generally, FIO provides insurance 
expertise and technical assistance within Treasury and to other federal 
agencies, including to the Federal Emergency Management Agency in 
connection with the National Flood Insurance Program (NFIP). FIO's 
engagement on climate-related issues also includes the issuance of 
public reports addressing natural disasters, climate change, and 
insurance, including through its annual report to Congress and the 
President.\24\
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    \23\ See, e.g., David Altmaier, Presidential Address (speech, 
NAIC Spring 2021 Opening Session, April 12, 2021), https://content.naic.org/article/notice_spring_2021_opening_session_prepared_remarks.htm.
    \24\ See, e.g., FIO, Report Providing an Assessment of the 
Current State of the Market for Natural Catastrophe Insurance in the 
United States (2015), https://home.treasury.gov/system/files/311/Natural%20Catastrophe%20Report.pdf. See also ``Reports and 
Notices,'' FIO, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices (providing links to all FIO Annual Reports 
and other reports).
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FIO's Initial Climate-Related Priorities

    FIO intends for its climate-related work to respond not only to the 
Executive Orders, but also to provide an insurance-specific focus 
within Treasury's broader climate work, including working with 
Treasury's Climate Hub.\25\ In particular, FIO intends to initially 
focus on the following three climate-related priorities:
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    \25\ See U.S. Department of the Treasury, ``Treasury Announces 
Coordinated Climate Policy Strategy with New Treasury Climate Hub 
and Climate Counselor,'' news release, April 19, 2021, https://home.treasury.gov/news/press-releases/jy0134.
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    1. Insurance Supervision and Regulation: Assess climate-related 
issues or gaps in the supervision and regulation of insurers, including 
their potential impacts on U.S. financial stability.
    Maintaining the financial stability of the insurance sector will 
involve identifying and filling gaps (if any) in insurance supervision 
with a focus on assessing climate-related financial risks. This will 
include monitoring the integration of climate-related financial risks 
into insurance supervisory practices and regulatory frameworks, as well 
as assessing whether sufficient data, methodologies, and tools exist to 
manage the solvency of insurers and to protect them against the long-
term risk of climate change. To that end, FIO plans to assess 
supervisory practices and resources, including but not limited to 
examination policies and procedures, solvency assessment and 
techniques, data availability and integrity, public disclosures, 
modeling, and forward-looking assessments (e.g., scenario analysis, 
stress testing). FIO will consult with individual state insurance 
regulators and the NAIC during its assessment of such supervisory 
practices and resources.
    2. Insurance Markets and Mitigation/Resilience: Assess the 
potential for

[[Page 48817]]

major disruptions of private insurance coverage in U.S. markets that 
are particularly vulnerable to climate change impacts; facilitate 
mitigation and resilience for disasters.
    Growing evidence indicates that climate change may be associated 
with a decline in the availability and affordability of insurance 
provided by the private sector (i.e., private insurance coverage) in 
certain markets.\26\ The creation and expansion of insurers of last 
resort by individual U.S. states and the federal government highlights 
this problem.\27\ FIO intends to examine the insurability of disasters 
that are produced or exacerbated by climate change, including 
wildfires, hurricanes, floods, wind damage, and extreme temperatures.
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    \26\ See, e.g., FIO, Annual Report on the Insurance Industry 
(September 2020), 59-60, https://home.treasury.gov/system/files/311/2020-FIO-Annual-Report.pdf. See also Exec. Order No. 14,030 Sec.  
3(b)(i) (directing FIO to assess ``the potential for major 
disruptions of private insurance coverage in regions of the country 
particularly vulnerable to climate change impacts'' as distinct from 
insurance provided by or backed by a government entity, such as the 
federal NFIP. (emphasis added)).
    \27\ See, e.g., ``California FAIR Plan Property Insurance,'' 
https://www.cfpnet.com; ``About Us: Who We Are,'' Citizens Property 
Insurance Corporation, https://www.citizensfla.com/who-we-are; 
Congressional Research Service, Introduction to the National Flood 
Insurance Program (NFIP), Report No. R44593 (Jan. 5, 2021), 1, 
https://fas.org/sgp/crs/homesec/R44593.pdf.
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    Additionally, traditionally underserved communities and consumers, 
minorities, and low- and moderate-income persons may have 
disproportionate challenges in obtaining affordable property insurance 
to cover the risks posed by climate-related disasters; further declines 
in available and affordable insurance could exacerbate the inequities 
that these persons face.\28\ This situation underscores the need to 
identify solutions to address the growing protection gap exacerbated by 
climate change.\29\ Therefore, FIO also intends to assess the 
availability and affordability of insurance coverage in high-risk 
areas, particularly for traditionally underserved communities and 
consumers, minorities, and low- and moderate-income persons.
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    \28\ See, e.g., Rachel Morello-Frosch, et al., The Climate Gap: 
Inequalities in How Climate Change Hurts Americans & How to Close 
the Gap (2018), 17, https://dornsife.usc.edu/assets/sites/242/docs/ClimateGapReport_full_report_web.pdf.
    \29\ See, e.g., Aon 2020 Cat Insight Annual Report; Federal 
Advisory Committee Protection Gap Subcommittee, Addressing the 
Protection Gap Through Public/Private Partnerships & Other 
Mechanisms, (December 5, 2019), https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapPresentation.pdf; ACPR, A 
First Assessment of Financial Risks Stemming from Climate Change: 
The Main Results of the 2020 Climate Pilot Exercise, No. 122-2021 
(2021), 60, https://acpr.banque-france.fr/sites/default/files/medias/documents/20210602_as_exercice_pilote_english.pdf.
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    Beyond analyzing potential insurance market disruptions, FIO 
intends to look at solutions, including identifying best practices for 
mitigation that can then increase post-disaster resilience, including 
solutions that can help ensure sufficient availability and 
affordability of insurance for consumers in light of increasing 
climate-related disaster risk. In addition, FIO will examine the role 
of insurers in supporting climate resilience in critical 
infrastructure, as well as in supporting green investment initiatives.
    3. Insurance Sector Engagement: Increase FIO's engagement on 
climate-related issues; leverage the insurance sector's ability to help 
achieve climate-related goals.
    FIO plans to increase its engagement on climate-related issues and 
take a leadership role in analyzing how the insurance sector may help 
mitigate climate-related risks. Throughout this work, FIO will engage 
with stakeholders, including through this RFI. Additionally, the 
insurance sector has the ability to shape industries, products, and 
practices through its functions in the financial markets and broad 
understanding of risk. Thus, it can influence climate-related activity 
of other sectors of the U.S. economy. FIO therefore will engage with 
the insurance sector to assess how the sector may help achieve national 
climate-related goals, including mitigation, adaptation, and transition 
to a lower carbon economy. This could include insurance sector 
consideration of underwriting activities, investment holdings, and 
business operations to support a low emissions economy.\30\ It also 
could encompass insurance sector transition of its operational and 
attributable greenhouse gas (GHG) emissions.\31\ In addition, FIO plans 
to consider ways to address the lack of common methodology and 
standardization in measuring financed emissions, particularly those of 
non-public companies in which the insurance sector underwrites and 
invests. Currently, only one state has passed legislation that is 
intended to leverage the insurance sector's ability to affect GHG 
emissions.\32\
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    \30\ See, e.g., U.N. Environment Programme Finance Initiative, 
``The Net Zero Insurance Alliance, Statement of Commitment by 
Signatory Companies'' (July 2021), 1 n. 1, https://www.unepfi.org/psi/wp-content/uploads/2021/07/NZIA-Commitment.pdf.
    \31\ GHG includes Scope 1, 2, and 3 emissions. Scope 1 emissions 
are direct GHG emissions that occur from sources controlled or owned 
by an entity (such as an insurer). Scope 2 emissions are indirect 
GHG emissions associated with purchase of electricity, steam, heat, 
or cooling by an entity. Scope 3 emissions are all other indirect 
GHG emissions not covered by Scope 2 and where an entity may impact 
in the value chain, such as business travel and investments. For 
insurers, Scope 3 emissions would include the Scope 1, 2, and 3 
emissions by policyholders when significant (and when data is 
available to determine them). See, e.g., ``Scope 1 and Scope 2 
Inventory Guidance,'' U.S. Environmental Protection Agency (EPA), 
https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance; ``Scope 3 Inventory Guidance,'' EPA, https://www.epa.gov/climateleadership/scope-3-inventory-guidance.
    \32\ Claire Wilkinson, ``Connecticut Bill Calls for Regulation 
of Insurers' Climate Risks,'' Business Insurance, June 17, 2021, 
https://www.businessinsurance.com/article/20210617/NEWS06/912342605/Connecticut-bill-calls-for-regulation-of-insurers%E2%80%99-climate-risks.
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I. Request for Comments

    Below, FIO invites public comments on a series of questions. The 
responses to this RFI will help inform FIO's assessment of the 
implications of climate-related financial risks for the insurance 
sector. It also will help FIO better understand (1) which data elements 
are necessary to accurately assess climate risk; (2) which data 
elements remain unavailable; and (3) how FIO could collect this data 
and make it available to stakeholders as needed. Access to high-
quality, reliable, and consistent data will be necessary for 
accomplishing all three of FIO's initial climate-related priorities. 
FIO also will identify and issue recommendations on individual actions 
that can be taken by various insurance sector stakeholders (such as 
state insurance regulators, insurers, and policyholders) to address 
climate-related financial risks and facilitate the U.S. insurance 
sector's transition to a more sustainable future. FIO recognizes that 
an effective policy response to climate-related financial risk requires 
an iterative approach and intends to adjust its work and priorities as 
needed.

Executive Order on Climate-Related Financial Risk

    1. Please provide your views on how FIO should assess and implement 
the action items set forth for FIO in the Executive Order on Climate-
Related Financial Risk.\33\
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    \33\ Exec. Order No. 14,030 Sec.  3(b)(i).
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FIO's Initial Climate-Related Priorities

    2. Please provide your views on FIO's three climate-related 
priorities and related activities, particularly with regard to whether 
there are alternative or additional priorities or activities that FIO 
should evaluate regarding the impact of climate change on the insurance 
sector and the sector's effect on mitigation and adaptation efforts.

[[Page 48818]]

Climate-Related Data and FIO's Data Collection and Data Dissemination 
Authorities

    3. What specific types of data are needed to measure and 
effectively assess the insurance sector's exposures to climate-related 
financial risks? If data is not currently available, what are the key 
challenges in the collection of such climate-related data? In your 
response, please provide your views on the quality, consistency, 
comparability, granularity, and reliability of the available or needed 
data and associated data sources.
    4. What are the key factors for the insurance sector in developing 
standardized, comparable, and consistent climate-related financial risk 
disclosures? In your response, please discuss whether a global approach 
for disclosure standards needs to be adopted domestically for insurers. 
Please also address the advantages and disadvantages of current 
proposals to standardize such disclosures, such as those set forth by 
the Task Force on Climate-Related Financial Disclosures or the NAIC's 
Insurer Climate Risk Disclosure Data Survey.
    5. Please provide your views on how FIO's data collection and 
dissemination authorities should be used by FIO to research, monitor, 
assess, and publicize climate-related financial risk and other areas of 
the insurance markets that are affected by climate change.
    6. What are the likely advantages and disadvantages of a verified, 
open-source, centralized database for climate-related information on 
the insurance sector? Please include in your response the types of 
information, if any, that may be most useful to disseminate through 
such a database and the key elements in the development and design of 
such a database.

Insurance Supervision and Regulation

    7. How should FIO identify and assess climate-related issues or 
gaps in the supervision and regulation of insurers, including their 
potential impact on financial stability? In your response, please 
address insurance supervision and regulations concerning: (a) 
Prudential concerns, (b) market conduct regarding insurance products 
and services, and (c) consumer protection. In addition, please discuss 
how FIO should assess the effectiveness of U.S. state insurance 
regulatory and supervisory policies in addressing and managing the 
climate-related financial risks with regard to the threat they may pose 
to U.S financial stability, including identifying (1) the major 
channels through which climate-related physical, transition, and/or 
liability risks may impact the stability of the U.S. insurance market, 
and (2) the degree to which insurers' business models could be affected 
by each category of risk and the relevant time horizons for such 
effects.
    8. Please identify the key structural issues that could inhibit the 
ability of insurance supervisors to assess and manage climate-related 
financial risk in the insurance sector (e.g., accounting frameworks, 
other standards). What barriers could inhibit the integration of 
climate-related financial risks into insurance regulation?
    9. What approaches used by other jurisdictions or multi-national 
organizations should FIO evaluate that would help inform it about 
existing supervisory and regulatory issues and gaps concerning climate-
related financial risks? Please describe these approaches, including 
their advantages and disadvantages, as well as available data sources 
on these approaches.

Insurance Markets and Mitigation/Resilience

    10. What factors should FIO consider when identifying and assessing 
the potential for major disruptions of insurance coverage in U.S. 
markets that are particularly vulnerable to climate change impacts?
    11. What markets are currently facing major disruptions due to 
climate change impacts? What markets are likely to be at risk for major 
disruptions due to climate change impacts in the future? When 
discussing markets at risk for future disruption, please estimate the 
likely time horizons (e.g., 5, 10, 20, or more years) when these 
disruptions may occur.
    12. Climate change is currently exacerbating economic losses caused 
by weather-related disasters and is projected to cause further damage 
in the future. Please provide information on the actions that insurers 
have taken in response to the threat of increased economic losses from 
climate-related disasters, including how insurers are incorporating 
mitigation and resilience considerations into their business 
operations, as well as what other strategies or solutions that insurers 
or U.S. regulators may want to explore that would help insurers 
mitigate the impact of climate change and build resilience.
    13. To what extent, if any, are models (whether internal 
proprietary models, open-source models, or third-party vendor models) 
used in the underwriting process to consider the impact of climate 
change? How do these models affect pricing of insurance products and 
business decisions (e.g., level of catastrophe exposure, utilization of 
reinsurance)? What are the best practices for model validation?
    14. How should FIO assess the availability and affordability of 
insurance coverage in U.S. markets that are particularly vulnerable to 
climate change impacts? In your response, please discuss how to balance 
maintaining insurer solvency with the need to address the availability 
and affordability of insurance products responsive to perils associated 
with climate-related risks, particularly for traditionally underserved 
communities and consumers, minorities, and low- and moderate-income 
persons.
    15. In what areas have public-private partnerships or 
collaborations among state or local governments been effective in 
developing responses to climate change that may be taken by the 
insurance sector or insurance regulators? How can FIO evaluate the 
potential long-term or permanent effects on the insurance sector of 
such public-private partnerships or state and local collaborations to 
address climate-related risks? How should FIO consider state insurance 
regulatory efforts on consumer education related to climate risks?

Insurance Sector Engagement

    16. Please provide your views on additional ways that FIO should 
engage with the insurance sector on climate-related issues.
    17. How should FIO assess the efforts of insurers, through their 
underwriting activities, investment holdings, and business operations 
to meet the United States' climate goals, including reaching net-zero 
emissions by 2050? For example, what steps should the insurance sector 
be taking to help improve transparency, comparability, and assessment 
of Scope 1, Scope 2, and, to the extent possible, Scope 3 GHG 
activities?
    18. What role or actions might states take to encourage the 
insurance sector's transition to a low emissions environment and an 
adaptive and resilient economy? In your response, please discuss 
whether efforts by states to encourage the development of new insurance 
products, to promote sustainable investment and underwriting 
activities, and to address protection gaps created by climate-related 
financial risks might facilitate this transition.

General

    19. Please provide any additional comments or information on other 
issues or topics that may be relevant to

[[Page 48819]]

FIO's work on insurance and climate-related risks.

Steven E. Seitz,
Director, Federal Insurance Office.
[FR Doc. 2021-18713 Filed 8-30-21; 8:45 am]
BILLING CODE 4810-AK-P


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