Insurers Must Name Climate-Problem Clients, Nonprofits Say

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By Cara Salvatore, LAW 360

March 21, 2019

Law360 (March 21, 2019, 8:44 PM EDT) — California is under pressure to force insurers to name the fossil-fuel projects they insure and underwrite, with nonprofit groups calling Thursday for emergency measures from the state’s insurance regulator.

Fifty-eight public interest nonprofits, including Consumer Watchdog, Greenpeace, Public Citizen, Sierra Club California and Divest Invest, wrote to California’s new insurance commissioner, Ricardo Lara, asking the regulator to immediately start rulemaking proceedings to require California-licensed insurers to disclose “all their investments in fossil fuel-related entities” and “all the fossil-fuel-related companies and projects that they underwrite or otherwise insure.”

The request comes as the National Association of Insurance Commissioners considers abolishing a questionnaire it created in 2010 in which large insurers are asked about climate-impacting investments. But insurers only respond if states in which they’re licensed require it, and only five states require it, according to the nonprofits. California is one of them.

California’s patterns of devastating wildfires in recent years have shown the bind in which insurers find themselves, the nonprofits said. Many insurers count among their clients old-regime energy and utility businesses that face increasing threat from a newly climate-sensitive business atmosphere. But those insurers also cover homeowners damaged by the effects of that climate change.

Looming behind all of that is the wider reality that these old-energy coal and gas clients are themselves driving climate change and its attendant insurance losses, the nonprofits said.

There is an “urgent need for insurers to realign their risk management and underwriting strategies, in order to address escalating climate risks. Such a realignment requires guidance from you, the state insurance regulator, to reconcile insurance investments and underwriting strategies for the future,” the nonprofits wrote to Lara.

“By insuring the fossil fuel projects responsible for the increased intensity of wildfires, mudslides and flooding, insurance companies fuel the very disasters they are insuring homeowners against,” the head of signatory Consumer Watchdog, Carmen Balber, said in a statement on Thursday.

On top of the coverage and underwriting obligations they’ve taken on, insurers also face legal costs related to climate battlefronts, as their customers are sued more and more over their historical contributions to climate change, the nonprofits noted.

Another exemplar of the insurance industry’s role in the climate system is Pacific Gas & Electric Co., which announced a plan to seek bankruptcy in January on the heels of lawsuits from three insurers over its wildfire liabilities.

Policy experts have said that PG&E’s bankruptcy agenda ought to spur utilities and public officials to examine whether the current utility business model properly factors in climate-change-related risks.

CDI spokesman Michael Soller said Thursday night, “Protecting Californians from the risks linked to climate change will continue to be a top priority for Commissioner Lara and the Department of Insurance. Commissioner Lara will examine the petition and determine if new rules are needed.”

Representatives for the National Association of Insurance Commissioners, the American Insurance Association and PG&E were not immediately available for comment.

–Additional reporting by Keith Goldberg. Editing by Jack Karp.

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