I’m not certain how to interpret the recent announcement by the National Association of Insurance Commissioners that reporting on climate risks will be optional. Climate change brings risks of drought, flooding, and wildfires, all of which will have massive impacts on the insurance industry. A year ago, the NAIC took a bold step of requiring that insurers around the country disclose these risks. In a closed door meeting last Sunday they reversed the decision, saying that reporting was optional and that climate risk reports would be kept confidential.
It’s hard to think what would drive this kind of a reversal. Last year mandatory reporting received universal approval, so it’s hard to imagine that the change is the result of simple political maneuvering, and the insurance industry’s focus on rigor hardly makes them vulnerable to climate skepticism . It seems more likely that what seemed like a decisive response to an emerging issue began to seem more and more disruptive as hard data came in. Voluntary, confidential disclosure creates rugs under which to hide the worst sorts of climate risks. This is a disservice to the rest of the economy, which uses insurance pricing as a signal of risk.
Wagging fingers at the insurance industry won’t help. Instead it’s worth asking what kind of conditions they would be able to fully disclose in and working to make those conditions a reality.