Treasury’s Federal Insurance Office Advances First Insurer Data Call to Assess Climate-Related Financial Risk to Consumers  November 3rd 2023

Treasury’s Federal Insurance Office Advances First Insurer Data Call to Assess Climate-Related Financial Risk to Consumers

Today, the U.S. Department of the Treasury’s Federal Insurance Office (FIO) took a critical next step to proceed with its first-ever data collection from insurers to assess climate-related financial risk to consumers across the United States.

FIO’s data collection will obtain previously unavailable insurance data at a ZIP Code level on a consistent, granular, and comparable basis from the largest homeowners insurance providers that collectively underwrite around 70% of homeowners insurance premiums nationwide. These nationwide data are critical to understanding how climate-related financial risks impact individuals and families across state markets and the United States, particularly given recent insurer pullbacks and significant premium increases in several states. In 2022, insurance covered only 60 percent of $165 billion in total economic losses from climate-related disasters, affecting millions of Americans.

“Americans are facing growing challenges from extreme weather events caused by climate change,” said Secretary of the Treasury Janet L. Yellen. “The Treasury Department’s insurer data collection is the first of its kind and will provide critical information at a local level to assess the increasing impacts of climate change on household budgets. The resulting data and analyses will help policymakers inform potential approaches to improving insurance availability and affordability for consumers.”

FIO today is providing public notice on its intent to proceed with the data collection, while also submitting the data collection request to the Office of Management and Budget for approval and public comment.

Today’s action advances the proposal for data collection that FIO published in October 2022. FIO has carefully reviewed the comments received and engaged with numerous stakeholders, including the National Association of Insurance Commissioners (NAIC) and state insurance regulators. Based on these discussions, FIO has streamlined and refined its data collection request to facilitate a more effective implementation of the collection. The changes to the data collection proposal are intended to help establish a national baseline for analytics at a ZIP Code level, while also reducing burden on small insurers. FIO will continue its engagement with the NAIC, state insurance regulators, and other stakeholders on this initiative.

Swiss Re P&C exec Anil Vasigiri on climate risk technology

The increasing number of climate disasters causing property losses and the increased risk of climate disasters affecting property insurance create greater demand for tech solutions to evaluate climate risks and respond. Swiss Re, as a reinsurer for property and casualty insurance carriers that directly deal with climate losses, has CatNet, a proprietary location intelligence tool for assessing climate risks, and Rapid Damage Assessment (RDA), a tool that uses aerial imagery and artificial intelligence and machine learning to generate actionable information for insurers.

Digital Insurance spoke with Anil Vasigiri, head of property and deputy head of P&C solutions at Swiss Re, about the RDA, the challenges in modeling climate disaster risks and how technology addresses these issues.

Rapid Damage Assessment is a new solution that we launched last year, just a few months before Hurricane Ian and it already has established its value proposition in the industry. We see a lot of traction for the platform. The components of what RDA brings exist in the market today – aerial imagery exists, AI/ML techniques exist, loss estimation exists.

Inflation, High Interest Rates, and Catastrophes Contribute to 2023 Underwriting Loss for P&C Industry, New Triple-I/Milliman Report Shows

The P/C insurance industry's forecast for 2023 combined ratio is 103.8, in part due to severe convective storm losses being the highest in decades.

The 2023 net combined ratio for the property/casualty industry is forecast to be 103.8, in part due to severe convective storm losses being the highest in decades. Hard markets continue with 2023 net written premium growth forecast at 8.3%, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.

Between 2020 and 2023, P/C insurance replacement costs increased an average of 45%, whereas inflation for the overall U.S. economy increased 15% within that same period.

The quarterly report, Insurance Economics and Underwriting Objections: A Forward View, was presented on Nov. 2, at an exclusive members only virtual webinar.

Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry results including inflation, increasing interest rates and overall economic underlying growth.

“P/C growth has improved in 2023, growing 1.3% versus 2.1% for overall gross domestic product (GDP). While many hurdles could derail such improvements, P&C underlying economic growth is currently positioned to increase faster than overall GDP by 2.6% versus 1.7% in 2024 and by 4.5% versus 2.0% in 2025,” he explained.

Commissioner Arnold Testifies on Behalf of NAIC at U.S. House Financial Services Subcommittee Hearing

Today, Minnesota Department of Commerce Commissioner Grace Arnold, co-vice chair of the National Association of Insurance Commissioners' (NAIC) Property and Casualty Insurance (C) Committee and member of the NAIC's Climate and Resiliency (EX) Task Force, represented NAIC Members before the U.S. House of Representatives Financial Services Subcommittee on Housing and Insurance.

Testifying at a hearing on "The Factors Influencing the High Cost of Insurance for Consumers," Commissioner Arnold observed how state insurance regulators "have the capacity to respond swiftly and nimbly to market conditions" in each of their markets.

In her companion written testimony, Commissioner Arnold discussed NAIC Members' work on two of the biggest challenges facing the insurance marketplace: natural catastrophes and emerging technologies. Their efforts include growing consumer awareness, strengthening communities' readiness, increasing industry transparency and disclosures, and equipping state insurance regulators with more tools and data to proactively address the challenges posed by natural catastrophes.

"We are on the front lines assisting consumers with policy questions and talking to businesses about their concerns. We are committed to doing all that we can to support our citizens and communities and continuing to work with our federal, state, and local partners to help our country address the devastating personal and economic impacts of natural disasters. State regulation has a strong 150-year-plus track record of evolving to meet the challenges posed by dynamic markets, and we continue to believe that well-regulated markets make for well-protected policyholders," said Commissioner Arnold.

Reiterating one of the NAIC's key legislative priorities, Commissioner Arnold urged Congress to pass a long-term reauthorization of the National Flood Insurance Program (NFIP) before its Nov. 17, 2023, expiration, noting, "A long-term extension will help provide certainty for policyholders in their efforts to prepare for flood disasters." She also urged support for the bicameral, bipartisan Disaster Mitigation and Tax Parity Act of 2023 (S. 1953 / H.R. 4070), which would ensure state-based disaster mitigation grants receive the same federal tax exemptions as federal mitigation grants, helping provide greater incentives for homeowners to take action to protect their homes from natural disasters.