It’s Monday, November 22, and New York has a new guide to climate-related financial risks.
Climate change poses “wide-ranging and material risks to the financial system,” a New York state agency is warning, and the insurance industry needs to be prepared.
The New York State Department of Financial Services, or DFS, on Monday became the first state regulator in the country to release detailed guidance on how insurers should manage risks from global warming — including physical risks from extreme weather, as well as “transition risks” driven by society’s shift away from fossil fuels. In a 22-page document, the agency said insurers should disclose climate-related risks, integrate risk considerations into their governance structure and business decisions, and use scenario analysis to consider the short-, medium-, and long-term financial consequences of climate change.
“The guidance is intended to support insurers’ efforts to manage the financial risks from climate change, bolstering the safety and soundness of the industry and the protection of consumers,” said Adrienne Harris, acting superintendent of the DFS, in a statement.
Insurers based in New York have until August 15 of next year to implement the DFS’s guidance on board governance — for example, by designating at least one member of their boards as responsible for overseeing the management of climate risks. They must also create a specific plan for implementing the DFS’s guidance in other realms. The agency says it will be monitoring insurers’ progress.
Steven Rothstein, a managing director at the corporate sustainability nonprofit Ceres, told E&E News that the decision could reverberate beyond New York. “It sends clear and unequivocal guidance about the importance of climate from this important regulator,” Rothstein said. “Because it’s New York, because it’s so large, we hope it will have an impact around the country.”
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