The New York State Department of Financial Services (DFS) has issued a proposed, detailed guidance for New York–regulated domestic insurers, outlining the department’s expectations for managing the financial risks from climate change. The proposed guidance builds on the DFS circular letter on Sept. 22, 2020. That letter outlined the department’s expectations that all New York insurers start […]
The New York State Department of Financial Services (DFS) has issued a proposed, detailed guidance for New York–regulated domestic insurers, outlining the department’s expectations for managing the financial risks from climate change.
The proposed guidance builds on the DFS circular letter on Sept. 22, 2020. That letter outlined the department’s expectations that all New York insurers start “integrating the consideration” of the financial risks from climate change into their governance frameworks; risk-management processes; and business strategies, along with developing their approach to climate-related financial disclosure.
DFS is seeking input on the guidance, which will be finalized following a 90-day public comment period, per a March 25 department news release.
“This proposed guidance provides a blueprint for insurers to manage the complex financial risks of climate change,” Superintendent of Financial Services Linda Lacewell said in the release. “We look forward to receiving input from the industry, experts and others to help shape our final guidance. The imperative of climate change is now.”
The proposed guidance is the first climate-related guidance issued by a U.S. financial regulator, the department noted.
It is based on the New York Insurance Law; National Association of Insurance Commissioners manuals; and publications, guidance, and supervisory statements of international regulators and networks, such as the Bank of England Prudential Regulation Authority, the Network for Greening the Financial System, the International Association of Insurance Supervisors, the Sustainable Insurance Forum, and the European Insurance and Occupational Pensions Authority.
Among other things, the proposed guidance covers governance, business models and strategy, risk management, scenario analysis, and public disclosure. Each insurer is expected to assess the significance of climate-related financial risks to its business and take a “proportionate” approach to managing those risks that reflects its exposure to those risks as well as the “nature, scale and complexity” of its business, DFS said.
DFS will continue to develop its supervisory approach to managing and disclosing climate risks over time, considering U.S. federal and state regulatory developments, as well as evolving practices in the industry and in the international supervisory community.
Based on the industry’s progress and the impact of climate risks to insurers, DFS will also develop a timeframe by which insurers should have “fully embedded” their approaches to managing climate risks in their governance structures; risk-management frameworks; and processes, business strategies, metrics and targets, and disclosure methods.
Those interested are encouraged to provide comments on the proposed guidance by June 23. Instructions for providing comments can be found on the public consultation section of the climate-change page on the DFS website (www.dfs.ny.gov/industry_guidance/climate_change), the department said.