Financial Risks from Climate Change
We live in a complex world in which crises proliferate and magnify risks to our financial system. Climate change is increasing the frequency and intensity of extreme weather events, resulting in property damage, business disruption, and the devaluation of investments and other assets. To continue to thrive in the face of global competition, it is essential that New York financial institutions integrate consideration of the financial risks from climate change into their governance frameworks, risk management processes, and business strategies and start developing their approach to climate-related financial disclosure.
Because of the importance of this issue, DFS has joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a group of central bankers and supervisors committed to managing financial risks from climate change globally, and the Sustainable Insurance Forum (SIF), an international network of insurance supervisors dedicated to helping the global insurance industry meet the challenges posed by climate change. DFS intends to continue engaging with all stakeholders to develop expert guidance in this critical area.
Banking Guidance
On October 29, 2020, DFS issued an Industry Letter outlining its expectations related to addressing the financial risks from climate change to all New York-regulated banking organizations, branches and agencies of foreign banking organizations, mortgage bankers and servicers, and limited purpose trust companies, as well as New York-regulated non-depositories (other than New York-regulated mortgage bankers, mortgage servicers, and limited purpose trust companies), including New York regulated money transmitters, licensed lenders, sales finance companies, premium finance agencies, and virtual currency companies.
- Read the letter: October 29th, 2020 - Climate Change and Financial Risks
Interested parties are invited to provide feedback on the proposed Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial Risks from Climate Change (see next section).
On February 9, 2021, DFS issued an industry letter alerting banking institutions subject to the New York Community Reinvestment Act that they may receive credit for financing activities that support the climate resiliency of low- and moderate-income, and underserved communities.
Request for Public Feedback
The Department has requested Public feedback from interested parties on the Proposed Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial Risks from Climate Change.
A webinar was hosted by DFS on January 11, 2023 to provide an overview of the proposed Guidance. The webinar covered the purpose of the Guidance, the agency's approach to developing it, overarching themes, and key provisions. The webinar also explained the feedback process, including the template developed for feedback submission.
- Watch the webinar recording on WebEx | View the Slide Deck (PDF)
How to Submit
Please use the Excel template below and provide relevant examples or data where appropriate.
- Submission template: Template (Excel)
Submit feedback via email to: [email protected]
The deadline for submitting feedback is 11:59 p.m. EST on April 28, 2023. Only submissions received before this deadline will be considered.
After the feedback period closes, all submissions, including the names and affiliations of the submitters, will be posted on this website. You should only submit information that you wish to make available publicly.
Insurance Guidance
Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change
On November 15, 2021, DFS issued final Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change, detailing DFS’s expectations related to insurers' management of the financial risks from climate change. After issuing a proposed version of the guidance in March, DFS received comments from a broad range of stakeholders, including insurers, trade groups, consumer advocates, climate experts, rating agencies and other financial regulators. The final guidance reflects DFS’s careful consideration of all comments received.
The guidance was informed by DFS’s ongoing dialogue with the insurance industry and international regulators and is based on the New York Insurance Law, National Association of Insurance Commissioners manuals, and the work of international regulators and networks. Building on an earlier circular letter on Climate Change and Financial Risks, the guidance sets out DFS’s expectations that all New York insurers start integrating the consideration of the financial risks from climate change into their governance frameworks, business strategies, risk management processes and scenario analysis, and developing their approach to climate-related financial disclosure.
- Read the final guidance: Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (PDF)
Circular Letter
On September 22, 2020, DFS issued Circular Letter No. 15 (2020) to all New York-regulated domestic and foreign insurance companies outlining its expectations related to addressing the financial risks from climate change.
- Read the letter: September 22nd, 2020 - Climate Change and Financial Risks
Proposed Guidance
- Read the proposed guidance: Proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (PDF)
- Review the detailed comments received on the proposed guidance: Comments on the proposed guidance
- Review a blacklined version of the final guidance reflecting the changes from the proposed guidance: Blacklined final guidance
Final Guidance Overview
DFS hosted a webinar which provided an overview of the guidance, major changes made to the proposed guidance that was issued for public comment, and the rationale for those changes.
FAQs for the Insurance Industry
The Circular Letter is addressed to all New York domestic and authorized foreign insurers. DFS believes that addressing the financial risks from climate change is critical to the solvency and liquidity of the insurance industry. DFS oversight over domestic and authorized foreign insurers, however, is not identical.
No. DFS does not currently plan to issue regulations pertaining to its climate-related supervisory activities, with the exception of Insurance Regulation 203, which we are proposing to amend to include climate change as one of the reasonably foreseeable and relevant material risks to be addressed by insurers’ enterprise risk management function.
As stated in the Circular Letter, questions pertaining to an insurer’s approach and activities related to the financial risks from climate change have been integrated into DFS’s examination process. Insurers will receive information requests related to climate in their First Day Letters to prepare for these exams. DFS issued final Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change on November 15, 2021.
No. The reference to “insurers’ assets” in DFS’s guidance does not apply to third party funds managed by insurers.
It may be done at either the holding company level or the insurer level.
Please refer to DFS’s Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on DFS’s expectations regarding scenario analysis and stress testing.
DFS encourages insurers to consider the financial risks from climate change as they perform their ORSAs but understands that it will take time for companies to include climate considerations in their ORSAs where appropriate. Please refer to DFS’s Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on DFS’s expectations regarding ORSAs.
The TCFD has become a globally adopted framework by regulators and industry alike. Since 2019, insurers may submit TCFD reports in lieu of responding to the NAIC Climate Risk Disclosure Survey, which some insurers have done. DFS understands that the four major components of TCFD (governance, strategy, risks, and metrics and targets) require different levels of sophistication and resources to complete. As such, DFS will continue to engage with industry participants on implementation of the various TCFD components. Please refer to DFS’s Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on DFS’s expectations regarding public disclosure.
In order to ensure open discussion during the seminars, recordings of the seminars have not been made public. However, most of the content covered during the seminars can be found in publicly available disclosure by several companies, including those represented by panelists in the DFS Climate Change Seminar Series. In particular, companies’ public sustainability or TCFD (Task Force on Climate-related Financial Disclosures) reports, CDP disclosures (a free account needs to be set up to access the CDP responses), and NAIC Climate Risk Disclosure Survey responses are good sources of information.
- CDP – Name of disclosure nonprofit CDP
- EIOPA – European Insurance and Occupational Pensions Authority
- ESG – Environmental, social, and governance
- EU – European Union
- EV – Electric vehicles
- IPCC - Intergovernmental Panel on Climate Change
- PCAF – The Partnership for Carbon Accounting Financials
- PACTA - Paris Agreement Capital Transition Assessment
- RCP - Representative Concentration Pathway
- SDS – Sustainable Development Scenario (pdf)
- UN PRI – United Nations Principles for Responsible Investment
- TCFD – Task Force on Climate-related Financial Disclosures
Events
Previous Events
2023 Climate Change Webinar - Banking
A webinar was hosted by DFS on January 11, 2023 to provide an overview of the proposed Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial Risks from Climate Change issued by DFS. The webinar covered the purpose of the proposed Guidance, DFS’s approach to developing it, overarching themes, and key provisions.
- Watch the webinar recording on WebEx.
The webinar explained the feedback process, including the template developed for feedback submission.
DFS has requested public feedback on the proposed Guidance (see above).
DFS 2021 Climate Change Webinar Series - Banking
- Webinar 1: The Fundamentals of Financial Risks from Climate Change
- Webinar 2: The Physical Risks from Climate Change in New York and the Northeast
- Webinar 3: Clean Energy Financing for Community and Regional Banks
2022 Climate Change Webinar - Insurance
DFS Report for New York Domestic Insurers
Insurance Industry Knowledge Exchange
Webinar 1: Climate-Related Governance and Organizational Structure
Watch the webinar recording on WebEx.
On November 15, 2021, DFS issued Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change. The Guidance established a timeline for implementing DFS’s expectations relating to corporate governance, and having specific plans in place to implement DFS’s expectations relating to organizational structure, by August 15, 2022.
The webinar provided information to support insurers in implementing the expectations set forth in the Guidance. The insurers on the panel shared their experiences in integrating the consideration of the financial risks from climate change into their governance and organizational structure, and discussed how the structure influenced their management of climate-related risks and opportunities. The Geneva Association, an international think tank focused on strategically important insurance and risk management issues, provided a global perspective on the topic
Moderator: My Chi To, Executive Deputy Superintendent of Insurance, New York Department of Financial Services.
Panelists:
- Lydia Covert, Corporate Sustainability Director, Unum Group
- Maryam Golnaraghi, Director of Climate Change and Environment, The Geneva Association
- Tinashe Masaya, Assistant Vice President, Senior Actuary, Voya Financial
- Robert Paiano, Chief Risk Officer, The Hartford
Webinar 2: Climate-Related Data and Tools
Watch the webinar recording on WebEx and view the slide deck .
This webinar provided support to help insurers understand and assess the data and tools needed to manage climate related risks and opportunities. The insurers on the panel shared information about climate data currently available in the market, their experiences selecting the right data and tools for their unique objectives, and views on how they assess their climate data needs throughout different phases of their climate risk journeys. The Principles for Responsible Investment, a United Nations-supported international network of investors, provided a global perspective on the topic.&
Moderator: Yue (Nina) Chen, Executive Deputy Superintendent of the Climate Division, New York State Department of Financial Services
Panelists:
- Kimberly Gladman, Senior Associate, Climate Change, Principles of Responsible Investment
- Wendy Walford, Head of Climate Risk, Legal & General
- Sarah Wilson, Head of ESG Integration and Responsible Investing, Nuveen, a TIAA company
Links referenced in the webinar:
- New York Domestic Insurers’ Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting: A DFS report that includes examples of good practices of climate risk management.
- Climate Risk: An Investor Resource Guide: A resource guide that provides resources, tools, and investor examples to address the four pillars of risk management identified by the Task Force on Climate-Related Financial Disclosures (TCFD).
- The Climate Risk Landscape: A report that covers both physical and transition risks and provides a summary of the key developments across third party climate risk assessment providers since May 2019.
2021 Climate Change Webinars - Insurance
DFS Reports for New York Domestic Insurers
- New York Domestic Insurers’ Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting
- An Analysis of New York Domestic Insurers’ Exposure to Transition Risks and Opportunities from Climate Change
Insurance Industry Knowledge Exchange
Seminar 1: Why Insurers Should Care about Climate Change
This first seminar in the DFS Climate Change Seminar Series focused on why insurers should care about climate change. Insurers of different sizes and at different stages of the journey of managing the financial risks from climate change shared their experiences, motivations, and challenges. The United Nations Principles for Sustainable Insurance provided a global perspective.
Moderator: My Chi To, Executive Deputy Superintendent of Insurance
Panelists:
- Jeff Arricale, Chief of Staff and Head of Capital Markets, ProSight Specialty Insurance
- Butch Bacani, Program Leader, United Nations Environment Programme's Principals for Sustainable Insurance
- Francis Bouchard, Group Head of Public Affairs & Sustainability, Zurich Re
- Karen Ignagni, President and CEO, EmblemHealth
- Jon Richter, Vice President of Global Sustainability, MetLife
Seminar 2: Risk Management and Disclosure
Disclosure and risk management are essential components of managing the financial risks from climate change. This panel of insurers have undertaken voluntary disclosure efforts and started incorporating climate change into their risk management frameworks. In this session, they explained what they have done and learned in the process and how others might get started as well. Ceres - a corporate sustainability think tank, provided a perspective beyond the insurance industry on these topics.
Moderator: Yue (Nina) Chen, Director of Sustainability and Climate Initiatives
Panelists:
- Alban de Mailly Nesle, Chief Risk and Investment Officer, AXA Group
- Mark Pasko, Chief Legal Officer and Corporate Secretary, QBE North America
- Mark Prindiville, Executive Vice President and Chief Risk Officer of Allstate Insurance Company
- Veena Ramani, Senior Program Director of Capital Market System, Ceres
- Jennifer Waldner, Chief Sustainability Officer, AIG
Seminar 3: Insurers as Investors
Insurers are among the largest debt and equity investors in the world. However, the impact of climate change on the asset side of insurers’ balance sheets typically gets much less attention than the liability side. The insurers on this panel have undertaken voluntary efforts to understand and manage the financial risks that climate change poses to their investments. In this session, they explained what they have done and learned in the process and how others might get started. The UN Principles for Responsible Investment, which has a number of insurance companies as signatories, provided a perspective beyond the insurance industry on these topics.
Moderator: My Chi To, Executive Deputy Superintendent of Insurance
Panelists:
- Claudia A. Bolli, Head of Responsible Investing, Swiss Re Group Asset Management
- Chris Fowle, Director of the Americas, UN Principles for Responsible Investment
- Karen Niessink, Managing Director, New York Life Investment Management
- Rachele Roth, Investment Manager, Utica National Insurance Group
- Kevin Strobel, CIO and Head of Investments and General Account ALM, Transamerica
Seminar 4: Setting Metrics and Targets
You cannot manage what you cannot measure. What are the meaningful metrics for insurers to measure the financial risks from climate change? Given the complexity and uncertainty surrounding climate change, where should companies start? What targets are being set by the leaders in this space? This session explained what they have done and learned in the process and how others might get started as well. 2 Degrees Investing Initiative, a non-profit think tank, provided a global ad multi-sector perspective on these topics.
Moderator: Yue (Nina) Chen, Director of Sustainability and Climate Initiatives
Panelists:
- Thomas Liesch, Climate Integration Lead at Allianz SE
- Maarten Vleeschhouwer, Head of PACTA at 2 Degrees Investing Initiative
- Sarah Wilson, Senior Director, Responsible Investing at Nuveen, a TIAA company
Resources
As part of the ongoing efforts of the New York State Department of Financial Services (“DFS”) to evaluate insurers’ management of climate-related financial risks (“climate risks”) and provide resources that will accelerate the industry’s progress, DFS has issued a report on “2021 Update on New York Domestic Insurers' Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Reponses and Other Reporting” (the “2021 Update”). This follows DFS’s issuance of Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (“Guidance”) in November 2021, detailing DFS’s supervisory expectations for New York domestic insurers’ management and disclosure of their climate risks.
Previously, DFS had analyzed the responses submitted by insurers in 2020 to the National Association of Insurance Commissioners Climate Risk Disclosure Survey (“Survey”), as well as Task Force on Climate-Related Financial Disclosures (“TCFD”) reports provided by insurers in lieu of Survey responses (together with the Survey responses submitted in 2020, the “2020 responses”). DFS issued a report in July 2021, New York Domestic Insurers' Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting from 2020 (“2020 Report”), containing the results of that analysis and examples of good practices described in the 2020 responses.
This latest report contains the results of DFS’s review and analysis of the Survey responses and TCFD reports of 85 insurance groups and 10 unaffiliated insurers submitted in 2021 (the “2021 responses”), as well as their progress when compared to the 2020 responses captured in the 2020 Report. This review and analysis cover groups or unaffiliated insurers with countrywide premiums ranging from $100 million to almost $200 billion. The 2021 Update focuses on the five Survey questions most relevant to the Guidance grouped into three themes – Risk Culture and Governance, Risk Management, and Modeling and Scenario Analysis – and analyzes the responses.
Based on a framework that it had developed for the 2020 Report, DFS rated insurers’ responses in one of four categories: “Yet to Start,” “Early Stage,” “Making Progress,” or “Good Progress.” The 2021 Update also contains examples of good practices described in the 2021 Survey responses.
DFS intends to continue reviewing insurers’ Survey responses and other disclosure materials to: (i) understand insurers’ overall status in identifying, assessing, and managing climate risks, (ii) identify good practices that can be shared with the industry, (iii) support risk-based supervision by identifying insurers that appear to lag, generally or in a specific area, compared to their peers, (iv) verify compliance of insurers’ implementation of the supervisory expectations set forth in the Guidance with the existing timeline, and (v) inform the establishment of timelines for implementation of the remaining supervisory expectations set forth in the Guidance.
Insurers’ ratings will be used only for DFS’s supervisory purposes and will not be publicly disclosed.
DFS hosted a webinar on August 2, 2022 to provide an overview of the 2021 Update. See webinar recording on WebEx. The slides can be viewed here.
DFS has issued a report on “New York Domestic Insurers’ Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting from 2020.” The analysis covers 121 responses by insurers to the 2020 Survey and eight Task Force on Climate-Related Financial Disclosures reports submitted in 2020 by a total of 93 groups and non-affiliated companies, representing insurers with countrywide premiums ranging from $100 million to close to $100 billion. Survey questions cover how insurers incorporate climate risks into their governance, risk-management, and investment plans, as well as detail steps taken by insurers to engage key constituencies and policyholders on the topic of climate change.
Based on a framework that it developed, DFS rated insurers’ responses in one of four categories: “Yet to Start,” “Early Stage,” “Making Progress,” or “Good Progress.” DFS intends to continue reviewing insurers’ Survey responses and other disclosure materials to understand insurers’ overall status in identifying, assessing, and managing climate risks, identify good practices that can be shared with the industry, and support risk-based supervision. Insurers’ ratings will be used only for DFS’s supervisory purposes and will not be publicly disclosed.
DFS hosted a webinar on August 4, 2021 to provide an overview of the report. See webinar recording on WebEx. The slides can be viewed here.
DFS has issued a report analyzing New York domestic insurers’ exposure to the financial risks arising from society’s transition towards a low-carbon economy, furthering DFS’s efforts to support insurers in managing the financial risks from climate change. The report, “An Analysis of New York Domestic Insurers’ Exposure to Transition Risks and Opportunities from Climate Change,” is the result of a collaboration between DFS and the 2° Investing Initiative (2DII), an independent, non-profit think tank working to align the financial sector with international climate goals.
The report is intended to provide insurers with an example of a tool that can help them analyze their transition risks and inform actions to mitigate them. Working with DFS, 2DII analyzed the transition risks of New York domestic insurers by assessing the alignment of their equity and corporate bond portfolios using their 2019 Schedule D data against different climate scenarios. The report also outlines investment-related strategies that insurers can consider to mitigate their transition risk exposure.
Insurers can upload their portfolios to 2DII's online platform TransitionMonitor to generate individual reports. The tool's terms and conditions and confidentiality information can be found here. 2DII and TransitionMonitor are completely independent of DFS.
DFS and 2DII held two webinars for New York domestic insurers to provide an overview of the aggregate report and discuss how insurers might use their individual reports that were generated by 2DII for insurers included in the analysis.
Recording of the webinar on the aggregate report on June 21, 2021 (WebEx)
Slides of the webinar on the aggregate report on June 21, 2021 (PDF)
Recording of the webinar on the individual reports on July 12, 2021 (WebEx)
There were no slides used for the July 12, 2021 webinar.
Recording of the webinar for Physical Climate Risks in New York, Part 1: Overview on May 24, 2021 (WebEx)
Slides of the webinar for Physical Climate Risks in New York, Part 1: Overview on May 24, 2021 (PDF)
Slides of the webinar for Physical Climate Risks in New York, Part 2: Coastal Risk on May 26, 2021 (PDF)
Recording of the webinar for Community and Regional Banks on February 18, 2021 (WebEx)
Slides for the webinar for Community and Regional Banks on February 18, 2021 (PDF)
Recording of the webinar for Mortgage Banking Institutions on February 24, 2021 (WebEx)
Slides for the webinar for Mortgage Banking Institutions on February 24, 2021 (PDF)
Questions
Please direct any questions or comments to [email protected].