US Demands Climate Data as Insurers Make Coverage Unaffordable
The United States is taking significant steps to address the growing impact of climate change on the insurance industry. Insurers will be required to provide detailed data on their home insurance policies, premiums, claims, and losses, specifically at a zip-code level for the period spanning six years from 2017 to 2022.
Graham Steele, the US Treasury assistant secretary for financial institutions, emphasized the alarming trend of a fivefold increase in billion-dollar disasters over the past five years when compared to the 1980s. Despite this surge in climate-related disasters, insurance coverage only addressed 60% of the $165 billion in losses incurred in 2022.
The consequences of climate change have made it progressively challenging for homeowners and consumers to secure available and affordable insurance. Many large insurers have recently opted to deny new policies in certain areas or even exit the market entirely due to climate-related events. Over the past year, more than a dozen US states witnessed double-digit rate increases by their largest home insurers.
The US Treasury's proposal to gather underwriting data from American insurers was first introduced in October 2022, although it faced objections from businesses concerned about potential cost increases for insurers. In response, the Treasury limited the data collection scope to insurance providers that constitute 1% or more of the US homeowners' insurance market. Collectively, these companies underwrote approximately 70% of US homeowners' premiums.
This development highlights the fragmented nature of insurance regulation in the United States, which is overseen at the state level without a federal regulator to monitor the industry's nationwide landscape. The Federal Insurance Office, operating within the Treasury, possesses the authority to collect data on the US insurance market but lacks supervisory powers.
The Treasury's next steps following the receipt of insurance data remain undetermined. Officials are striving to establish a data-driven, empirical baseline to comprehend the extent of climate-related issues within the industry and assess the impact on consumers.
According to Swiss Re, a reinsurance group, the global insurance industry encountered $50 billion in losses from natural disasters during the first half of 2023, marking the worst start to a year since 2011. Global temperatures have risen by at least 1.1°C since the pre-industrial era, contributing to the increased frequency and severity of extreme weather events, as concluded by the UN Intergovernmental Panel on Climate Change.
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