US insurers to disclose climate risks
The US National Association of Insurance Commissioners (NAIC) has announced a new framework requiring insurance companies to report their climate-related risks, in alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). The adoption of this international benchmark for climate risk disclosure, will, it says, “help insurance regulators and the public to better understand the climate-related risks to the U.S. insurance market,” and put state regulators “on the forefront of climate risk disclosure to protect consumers.”
Fifteen states have committed to using the new ‘Climate Risk Disclosure Survey’ in 2022 for insurance companies licensed in their jurisdictions, representing nearly 80% of the US insurance market. While 28 insurance companies provided TCFD-compliant reports in 2021, this agreement will take that number to nearly 400 companies and groups.
This move by NAIC is a recognition that the insurance industry is heavily affected by climate events, and would seem to be another manifestation of the trend towards mandatory climate reporting in the US and around the globe. Of course, we would urge these disclosures to be made digital from the outset. The use of XBRL would help ensure consistency, comparability and ease of analysis – all important contributors to the greater transparency sought by NAIC.
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