The Federal Insurance Office (FIO) of the US Department of the Treasury has issued a request for public input on the office’s future work on the insurance sector and climate-related financial risks.
The FIO request for information follows a May executive order from President Biden on climate-related financial risk.
FIO will focus on three initial climate-related priorities.
The first is assessing climate-related issues or gaps in the supervision and regulation of insurers, including their potential impacts on US financial stability.
The second is assessing the potential for major disruptions of private insurance coverage in US markets that are particularly vulnerable to climate change impacts, as well as facilitating mitigation and resilience for disasters.
The last priority is increasing FIO’s engagement on climate-related issues and leveraging the insurance sector’s ability to help achieve climate-related goals.
FIO said that the responses to the request for information, which need to be submitted by 15 November, will help inform its assessment of the implications of climate-related financial risks for the insurance sector. It also will help the office better understand the need for and the current availability of data related to these issues.
“Today’s filing in the Federal Register is an important step towards assessing climate-related financial risk in the insurance sector,” said US treasury secretary Janet Yellen.
“Ensuring that consumers have adequate information, and that the insurance industry is appropriately assessing climate-related financial risk is essential as we work to address the climate crisis.”
The FIO notice stated that the increased frequency and severity of climate-related disasters, as well as the magnitude of associated insured losses, highlight the significance of climate-related financial risks and the role of insurers in responding to them.
“Additionally, some insurance consumers are increasingly unable to find affordable and available property insurance coverage in certain insurance markets,” it said.
FIO added that the impact of climate change also affects insurers through their broader role in financial markets.
The notice also said the assessment of how climate-related financial risks may affect the insurance sector should consider physical risks, transition risks and liability risks.
President Biden’s Executive Order on Climate-Related Financial Risk emphasised the important role that the insurance sector can play in combating climate change. It instructed Yellen to task the FIO “to assess climate-related issues or gaps in the supervision and regulation of insurers”.