In a recent press release dated November 2, 2023, the Senate Budget Committee, led by Senator Sheldon Whitehouse (D-RI) and Senator Ron Wyden (D-OR), launched an investigation into the challenges faced by insurance companies due to mounting climate change risks. The inquiry is an extension of a previous investigation into the U.S. insurance industry’s investments in and underwriting of fossil fuel expansion projects that contribute to climate change.
Growing Concerns
The Senators expressed growing concerns about the economic consequences of a widespread decline in property values driven by increasing exposure to climate risks. They highlighted the potential impacts on households, federal revenues, and spending, drawing parallels to the 2008 financial crisis.
As part of this investigation, letters were sent to the 20 largest private sector insurance companies in California, Louisiana, Florida, and Texas, a total of 41 companies (American International Group, Allied Trust, American Integrity, Allstate, American Family, AmTrust, Applied Underwriters, Auto Club Enterprises, AXA, Berkshire Hathaway, Chubb, CNA, CSAA, Fairfax, Farmers, Florida Peninsula, First Protective, Gulf States, Hartford, Heritage, Homeowners of America, Homeowners Choice, Kemper, Louisiana Farm Bureau, Liberty Mutual, Mercury General, Nationwide, Olympus, People’s Trust, Progressive, Security First, Shelter Mutual, Slide, State Farm, SURE, Tokio Marine, Tower Hill, Travelers, Universal Insurance Holdings, USAA, and Zurich).
Information Requested
The letters requested information related to various aspects, including how these companies consider climate-related risks when determining insurance premiums, premium rate forecasts for the next five years, climate-related threats to their solvency, and a list of counties where homeowners’ policies have not been renewed in recent years.
Risks
Insurance industry executives, economists, actuaries, and other experts have testified that climate change could lead to substantial losses, increasing insurance premiums, and insurers pulling out of at-risk markets. These changes could result in declining property values and properties becoming unmortgageable, posing systemic risks to the U.S. economy.
Next Steps
The companies have until November 17, 2023, to respond to the Committee’s requests. The Senators are particularly interested in whether the insurance industry has meaningful plans to align their investments and underwriting decisions with the Paris Agreement benchmarks to mitigate the worst effects of climate change.
This investigation underscores the pressing need for the insurance industry to adapt to the changing climate landscape, as climate-related risks continue to grow. The results of this inquiry will likely have significant implications for the future of insurance in the face of climate change.
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