Climate leadership: How Washington State’s Insurance Commissioner is leading by example
8 July 2016
Written by Butch Bacani
Programme Leader of the UNEP FI Principles for Sustainable Insurance (PSI)—a global sustainability framework and the largest collaborative initiative between the United Nations and the insurance industry.
Mike Kreidler, Insurance Commissioner, Washington State
Charlene Nelson, Chairwoman of the Shoalwater Bay Tribe in Washington State, spoke about her ancestral land and how the environment has changed significantly over the decades. She stressed the importance of leaving a responsible legacy and made an impassioned call for sustainable development—one that meets the needs of the present without comprising the ability of future generations to meet their own needs.
Chairwoman Nelson opened the summit on climate risk and the insurance industry convened by the Washington State Office of the Insurance Commissioner and the University of Washington’s Climate Impacts Group. The event was held in Seattle last June.
Charlene Nelson (left), Chairwoman of the Shoalwater Bay Tribe in Washington State, opening the 2016 Climate Risk Summit
Climate Risk Summit
This Climate Risk Summit demonstrated the leadership of another “tribe”—insurance regulators. A growing number of regulators in different jurisdictions are addressing sustainability challenges—such as climate change adaptation and mitigation, disaster risk reduction, and access to insurance—through various approaches.
The aim of the Summit in Seattle was to raise awareness with insurers and stakeholders about the need to consider climate risk, and to establish momentum for future industry engagement.
Dr. Joe Casola, Deputy Director of the University of Washington’s Climate Impacts Group
Washington State’s Insurance Commissioner, Mike Kreidler, led a wide-ranging discussion that spanned climate change impacts on industry sectors, communities, and insurance and investment portfolios; actions being taken by insurers and investors to manage climate risk and develop solutions; and opportunities for the insurance industry and its stakeholders to strengthen their efforts. The event was underpinned by constructive dialogue involving US and international insurers and reinsurers, insurance regulatory and supervisory officials, institutional investors, academia, think tanks, and civil society organisations.
I had the opportunity to provide the global context, particularly the significance of the Paris Agreement on Climate Change as a global policy signal, the UNEP FI Principles for Sustainable Insurance as a global framework and the largest collaborative initiative between the UN and the insurance industry, and the coming Sustainable Insurance Policy Forum for insurance regulators. It was also a good moment to share examples of climate leadership by insurers across the globe in their insurance and investment activities.
Butch Bacani, Programme Leader of the UNEP FI Principles for Sustainable Insurance Initiative
The Washington State Office of the Insurance Commissioner
For the Washington State Office of the Insurance Commissioner (OIC), the Climate Risk Summit is part of an ongoing journey and long-term commitment to sustainable development. In this vein, we would like to share how the OIC is demonstrating climate leadership:
In Washington State, Commissioner Kreidler is encouraging insurers to become involved in efforts on land-use regulation and building code requirements in order to prevent or reduce problems due to climate change, such as wildfires and sea level rise. It forms part of the OIC’s wider efforts to bring city, country and state officials together with builders and insurers to develop approaches to reduce climate risk.
At the national level, since 2006, Commissioner Kreidler has been the Chair of the US National Association of Insurance Commissioners’ (NAIC) Climate Change and Global Warming Working Group. The NAIC is the US standard-setting and regulatory support organisation created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five US territories. NAIC members form the national system of state-based insurance regulation in the US.
In 2008, the NAIC adopted a white paper on the potential impacts of climate change on regulation, and in 2009, it approved a requirement that insurers disclose to regulators the financial risks they face from climate change and actions they are taking to respond. States that have mandatory climate risk disclosure by insurers include California, Connecticut, Minnesota, New Mexico, New York and Washington State. In 2012, the NAIC adopted revisions to the Financial Condition Examiners Handbook to ensure that insurers are addressing climate risk, including risk-focused questions on potential impacts of climate change on solvency, building on actions on disclosure. In the context of financial examinations, the OIC has led a working group that developed guidance for other state regulators in evaluating insurers’ climate risk in insurance and investment activities.
In 2015, the OIC went global and made a long-term commitment by signing the UNEP FI Principles for Sustainable Insurance (PSI). Aside from Washington State, the PSI has been adopted by the insurance regulators of California, Brazil, Costa Rica, and the Philippines. To end 2015, and in line with its PSI commitment, the OIC joined the Paris Pledge for Action to support the implementation of the historic Paris Agreement on Climate Change forged by the world’s governments.
Following UN global policy frameworks that were agreed in 2015 to shape a sustainable future for all—from the Paris Agreement on Climate Change to the UN Sustainable Development Goals and the Sendai Framework for Disaster Risk Reduction—the OIC is heeding the call for 2016 to be a year of implementation and delivery. At the onset of 2016, the OIC became part of the core leadership group of insurance regulators who are establishing the Sustainable Insurance Policy Forum (SIPF) together with UNEP, through the joint efforts of the PSI and the UNEP Inquiry into the Design of a Sustainable Financial System. It is envisaged that the SIPF will provide a practical arena to strengthen the ability of insurance regulators to manage sustainability dimensions of their mandates through international cooperation.
Last April, Commissioner Kreidler spoke about the importance of addressing climate risk at the 2016 Annual Conference of the Latin American Association of Insurance Supervisors (ASSAL) in Rio de Janeiro. The ASSAL event was hosted by the Brazilian Superintendence of Private Insurance (SUSEP), which has equally demonstrated leadership by signing the PSI and joining the core group of regulators establishing the SIPF with UNEP. This shows how the PSI’s global community of practice—involving insurance companies, associations and regulators, and key stakeholders—are individually and collaboratively advancing the sustainable insurance agenda.
All of this helped set the stage for this year’s Climate Risk Summit in Seattle that the OIC convened with the University of Washington.
Venue of the 2016 Climate Risk Summit: The Intellectual House at the University of Washington
We hope this example of climate leadership in the US would inspire others to take action and support collaborative efforts to promote economic, social and environmental sustainability.
Indeed, this underscores Principle 3 of the Principles for Sustainable Insurance:
“We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues.”
Butch Bacani of the UN (left) and Washington State’s Insurance Commissioner, Mike Kreidler