New York Regulator Wants Insurers to Disclose Climate Risks
(Bloomberg) -- New York State’s financial regulator called on insurers to consider climate-related risks in their business planning and provide related disclosures.
The guidance published Monday by the Department of Financial Services directs insurers based in the state to account for their exposure to rising sea levels and climbing global temperatures. That includes disclosing climate risk and incorporating the dangers posed by climate change into risk-management frameworks.
“Climate change is an urgent issue that poses wide-ranging and material risks to the financial system,” DFS Acting Superintendent Adrienne Harris said Monday in a statement. “Insurers, which are uniquely impacted as climate change affects both sides of their balance sheets, also play a critical role in managing climate risks.”
The guidelines build on proposals outlined in March, adjusted through feedback from groups including insurers and climate experts. They arrive as regulators across the globe implement or consider implementing measures that would help to quantify how exposed financial institutions are to climate change.
In June, the Bank of England introduced a stress test of the country’s biggest lenders and insurers to judge how resilient they are to climate change. While officials at the U.S. central bank have resisted the idea of integrating climate-related tests in their annual stress tests of the largest banks, Federal Reserve Chair Jerome Powell has said he sees “climate scenario analysis” as an area of emerging study.
Read more: Munich Re CEO Says Finance Needs Government Road Map on Climate
Among New York-based underwriters are MetLife Inc., the largest U.S. life insurer, and American International Group Inc., one of the nation’s largest providers of property and casualty coverage.
In a statement announcing the guidance, the DFS identified itself as the first U.S. regulator to “issue a holistic set of expectations on managing the financial risks from climate change.” The move carries particular weight because the agency oversees major Wall Street firms and other significant financial institutions.
The guidance represents the agency’s latest action on climate change. Earlier this month, the DFS announced it had formed a climate division.
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