US NAIC Summer 2024 National Meeting Highlights: ESG-Related Initiatives

The US National Association of Insurance Commissioners (“NAIC”) held its Summer National Meeting in Chicago from August 12-15, 2024. During the Summer National Meeting, the Special (EX) Committee on Race and Insurance (“R&I Committee”) met on August 13, and the Climate and Resiliency (EX) Task Force (“CRTF”) met on August 15.

SPECIAL (EX) COMMITTEE ON RACE AND INSURANCE

The R&I Committee received updates and presentations on the following workstreams:

• Health Workstream:
• The R&I Committee heard a presentation from Annette V. James, Co-Chair of the Health Equity Committee of the American Academy of Actuaries. Ms. James reviewed the Health Equity Committee’s key 2023 takeaways and its 2024 focus on behavioral health. She discussed the importance of data in the work of the Health Equity Committee, including the use of data to measure and monitor racial disparities in health care. Ms. James noted that although data may be imperfect (e.g., claims data only includes people who use the health care system and omits those whose health care needs are not being met), it is still usable, with the key being that users of the data should understand its limitations and biases, and make appropriate adjustments. Discussing the impact of laws and regulations, Ms. James noted that laws are often not designed with an equity lens, and that federal and state laws may limit the ability to collect and use data, and may even limit the ability to enhance benefits. Finally, Ms. James discussed the Health Equity Committee’s 2024 focus on behavioral health and its goal of developing a framework that could be generalized for other health benefits.
• Life Workstream:
• The R&I Committee received a report on the Life Workstream’s April 25, 2024 document calling for financial literacy courses to be included in high school curriculums. The premise of that initiative is that a basic financial education, including one that introduces insurance types and concepts, is fundamental to future financial success.
• The R&I Committee received a report on a Financial Wellness Resource Guide that describes financial literacy initiatives in Maryland, Oregon, and the District of Columbia, specifically focused on underserved populations. Key findings and suggestions included hosting educational workshops and seminars in underserved communities, collaborating with local community centers, non-profit organizations and religious institutions, and providing information about insurance that is culturally sensitive and understandable for speakers of various languages.
• The R&I Committee received a report on a survey that the Life Workstream is developing, that would be used to elicit information from life insurers about how they consider an applicant’s past involvement with the criminal justice system during the underwriting process.

The R&I Committee also discussed its continuing focus on improving the level of diversity and inclusion in the insurance industry.

CLIMATE AND RESILIENCY (EX) TASK FORCE

The CRTF heard presentations from the following:

• reThought Flood, which offers an innovative product for underwriting flood risk that uses risk modeling in its methodology (developed in conjunction with actuaries and global reinsurers). The representative from reThought Flood discussed how consumer education, mitigation, and risk modeling are all relevant components for increasing the consumer take-up rate of flood insurance, in addition to closing flood insurance protection gaps.
• Marsh McLennan, discussing the Global Risks Report 2024 issued by the World Economic Forum. The presentation reviewed the evolution of the top five global risk concerns over time, the interconnected nature of many of the identified risks, and the impact of those risks on the insurance industry. The top five global risks in 2024 are (i) misinformation and disinformation; (ii) extreme weather events; (iii) societal polarization; (iv) cyber insecurity; and (v) interstate armed conflict. The presentation covered four areas of impact on the insurance industry: (i) withdrawal of insurance capacity from certain industries or areas with increasing loss profiles; (ii) increased capacity for customers that respond to ESG-related risk reduction initiatives; (iii) an increase in coverage exclusions and higher deductibles and sub-limits for some sectors; and (iv) innovation in product development, including parametric coverages and the use of captives and alternative risk transfer mechanisms.

The CRTF also discussed the following topics:

• Climate Risk Dashboard: The dashboard is a tool for regulators and the NAIC to understand wildfire, storm, and flood risks in individual states. The focus is on identifying and addressing protection gaps, including both physical risk and transition risk, as well as coverage trends. 
• Federal Update: Federal government agencies and Congress have been working to address climate risk, particularly with respect to climate events occurring in the western area of the US, which has large areas of federal land that are managed by federal agencies. The NAIC representative highlighted the following:
• Legislative proposals: (i) the Homeowners’ Defense Act (H.R. 3997), which would allow the US Department of the Treasury to guarantee debt issued by state catastrophe insurance programs that support the private insurance market in offering private residential property insurance; (ii) an above-the-line tax deduction for flood insurance premiums to make flood insurance more affordable; and (iii) the Prevent Environmental Hazards Act (H.R. 8637), which would authorize National Flood Insurance Program (“NFIP”) payouts to claimants for structures that have been condemned due to chronic erosion or unusual flooding, allowing for advance payouts for demolition of or relocation from such structures.
• Members of Congress have (i) urged US federal banking regulators to address climate-related financial risks, including concerns with data collection and gaps in data modeling for such risks; and (ii) made efforts to understand the impact of inflation on insurance premiums, replacement cost value versus actual cost value for property insurance, and the decreasing availability of insurance for homeowners.  
• The House Financial Services Subcommittee on Oversight and Investigations has discussed the SEC’s climate disclosure rule, marking the first hearing since the SEC updated the rule in March.  The implementation of this rule is on hold pending legal challenges.
• The Biden Administration has awarded funds to tribal nations for climate resilience projects addressing sea level risk, wildfire, and drought, while incorporating indigenous knowledge, and has created a “heat and health index” to identify heat-related risks by zip code, in addition to a tool in testing phases to help users of the tool identify flood-prone risk areas.
• The Federal Emergency Management Agency’s final rule that requires projects using its funds to consider future risks exacerbated by the changing climate is effective on September 9, 2024.

To view additional updates from the US NAIC Summer 2024 National Meeting, visit our meeting highlights page.