IAIS 10th Annual Global Seminar

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Presentation transcript:

IAIS 10th Annual Global Seminar June 29-30, 2017 California Department of Insurance (CDI) Sustainable Insurance: Climate Change and Financial Reporting by Insurers Dave Jones, California Insurance Commissioner

California Insurance Market $289 billion a year in insurance premiums. Largest insurance market in the United States. Sixth largest insurance market in the world. Approximately 1300 admitted insurance companies with over $7.5 Trillion in admitted assets ($5 Trillion in assets under management).

Climate Risk Financial Surveillance Initiatives NAIC Climate Risk Disclosure Survey. CDI Climate Risk Carbon Initiative. NAIC Form F, ORSA, routine examinations. FSB Task Force on Climate-related Disclosures.

NAIC Climate Risk Disclosure Survey Developed by the NAIC in 2009-2010. Eight questions that assess insurers’ responses to Climate Change. Mandatory. Insurers with $100 Million+ in direct written premiums. 1000+ insurers = 77% of the U.S. insurance market. Results made public in CDI online database. Online Interactive Response Database

Movement Away from Carbon = Stranded Assets Market forces: Decline in prices per kilowatt hour for renewable energy. Legal and regulatory measures at local, state, and national levels that reduce use of carbon. COP 21. Coal losses already a reality. Dow Jones U.S. Coal Index dropped 92.9% from 2011 to 2017. Pension funds losing billions. Coal companies going bankrupt. Global insurers divesting.

CDI Climate Risk Carbon Initiative Thermal Coal Divestment Request All 1300 admitted insurers. Divest from thermal coal investments. Refrain from future thermal coal investments. Voluntary. Public disclosure. Fossil Fuel Holdings Disclosure Admitted insurers with $100+ million of U.S. premiums. Detailed disclosure of their fossil fuel investments. Mandatory.

CDI Climate Risk Carbon Initiative Results $528 Billion in fossil fuel related investments. $10.5 Billion invested in thermal coal enterprises. $4 Billion thermal coal and fossil fuel investments divested. Additional $944 Million of thermal coal investments committed to be divested.

Results in User-Friendly Format & Drill Down

Reports Tab – Search Capabilities

Other Initiatives and Tools Routine financial examinations. NAIC Enterprise Risk Report (Form “F”). Own Risk Solvency Assessment (ORSA).

G-20 Task Force on Climate-related Financial Disclosures Report recommended voluntary disclosure of climate-related risks in all economic sectors. June 28, 2017, Final Report. G-20: July 7, 2017. CDI recommendations: Disclosures should be mandatory and public. Task Force, FSB, and G20 should take concrete steps toward this end. Add disclosure of investments in fossil fuel enterprises. G-20 should ask financial regulators to incorporate recommendations.

Conclusion Climate change poses a financial risk to insurers’ investments in oil, gas, and coal. Insurance regulators are adopting financial surveillance tools to query insurers about and evaluate responses to this risk. Widespread adoption of TCFD recommendations helps accomplish consistent and decision-useful climate related financial disclosures.