INDIANAPOLIS (Jan. 10, 2008) – The National Association of Mutual Insurance Companies (NAMIC) today expressed concerns about a draft white paper exploring the impact of climate change on insurance. In its comments to the National Association of Insurance Commissioners, NAMIC criticized the document for recommending that insurance commissioners take steps to lessen the effects global warming will have on insurance.
“For the most part, we believe the white paper’s discussion of natural disaster-related issues such as building codes, land-use planning, and flood insurance reform is thoughtful and constructive,” wrote Robert Detlefsen, NAMIC’s vice president for public policy. “However, the white paper is far more than a discussion of disaster mitigation.”
Of particular concern to NAMIC was the paper’s insinuation that global warming will increase the frequency and severity of all types of natural disasters, and that regulators should, therefore, respond by requiring insurers to engage in a formal process of climate risk disclosure.
“In our view, using disclosure requirements to pressure insurance companies into adopting a particular agenda for combating global warming is a flawed approach to addressing the challenges proposed by large-scale catastrophe risk,” Detlefsen wrote. “Instead, the white paper should examine the role that regulation often plays in distorting insurance markets and thereby increasing the risk of property loss and human suffering in disaster-prone regions.”
The paper urges the NAIC to “consider creating under the Financial Condition (E) Committee a working group to develop interrogatories and other tools to evaluate” risks allegedly related to climate change. “It is difficult to imagine how forcing insurers to respond to such questions would reduce the regulatory burden they face,” Detlefsen wrote.
NAMIC’s primary objection to these interrogatories is that their ultimate purpose is to change behavior. “It is, in other words, a tactic designed to ‘cajole or require insurers to take climate change risks seriously,’ which they can only demonstrate by altering their business practices to conform to the policy agenda embedded in the questions,” Detlefsen wrote.
A more effective approach, Detlefsen suggested, would be to examine insurance regulation in catastrophe-prone regions by analyzing particular rules and regulatory practices “to determine whether they are facilitating or hindering the ability of private insurance markets to play a constructive role in mitigating the effects of large-scale natural disasters.”
NAMIC believes that it is up to the government, not insurance regulators, to develop policies and programs that reduce greenhouse gas emissions and promote the development of alternative energy sources. “However, we believe there is much that insurance regulators can do to enhance the ability of insurers and insurance markets to ameliorate the social and economic effects of large-scale catastrophes,” Detlefsen wrote. “To that end, the Climate Change and Global Warming Task Force could perform a valuable public service by reorienting the focus of its white paper to identify specific insurance regulatory reforms that will create economic incentives for individuals and businesses to avoid, prevent, and mitigate catastrophe risk in hazard-prone areas.”
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Posted: Thursday, January 10, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:27:28 PM.
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