Overview
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 December 21, 2023, DFS issued Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial and Operational Risks from Climate Change. The Guidance covers New York State-regulated banking organizations, New York State-licensed branches and agencies of foreign banking organizations, and New York State-regulated mortgage bankers and mortgage servicers.
Prior to issuance of this guidance, DFS carefully considered all feedback received from regulated entities and other key stakeholders on the proposed Guidance published in December 2022. In response to feedback, the Department has published resources to assist organizations as they work to adopt measures that address their climate-related risk.
On January 11, 2024, DFS hosted a webinar which provided an overview of the Guidance and key changes made after consideration of public feedback on the proposed guidance issued in December 2022. Resources from that webinar can be found in the Webinars & Events section below.
Banking Industry Letters
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.
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.
Insurance Guidance
On November 15, 2021, DFS issued final Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change, detailing the Department's expectations related to insurers' management of the financial risks from climate change. After issuing proposed 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 the Department's careful consideration of all comments received.
The guidance was informed by an ongoing dialogue with the insurance industry and international regulators and is based on New York Insurance Law, National Association of Insurance Commissioners manuals, and the work of international regulators and networks. Building on an earlier Insurance Circular Letter on Climate Change and Financial Risks sent to to all New York-regulated domestic and foreign insurance companies outlining its expectations related to addressing the financial risks from climate change, the guidance sets out the Department'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 November 15, 2021 Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (PDF)
Insurance Circular Letters
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.
Proposed Guidance
- Read the Proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (PDF)
- Review the comments received on the proposed guidance: Comments on the proposed guidance
- Review a blacklined version of the final guidance reflecting changes from the proposed guidance: Blacklined final guidance
Insurance FAQs
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.
Refer to the Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on DFS 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. Refer to the Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on 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. Refer to the Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change for more information on DFS 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 – Carbon Disclosure Project nonprofit
- 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
Reports
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
As part of ongoing efforts of DFS to evaluate insurers’ management of climate-related financial risks and provide resources that will accelerate the industry’s progress, DFS has issued the 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. This latest report contains the results of the Department's review and analysis of insurers' responses to the National Association of Insurance Commissioners’ (NAIC) Climate Risk Disclosure Survey for reporting year 2021. The report covers 83 insurance groups and 13 unaffiliated insurers with countrywide premiums ranging from $100 million to almost $200 billion.
Issuance of the update follows the NAIC’s revision of the Survey questions to align with the widely adopted Task Force for Climate-Related Financial Disclosure (TCFD) standards. This report focuses on the following TCFD pillars covered in the survey: governance, risk management, strategy, and metrics and targets, reviewing progress across the industry and by line of business.
Over three reporting years, DFS has rated insurers’ responses according to their level of progress in implementing the Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change issued in November 2021, detailing supervisory expectations for New York domestic insurers’ management and disclosure of their climate risks. Insurers’ responses were rated in one of four categories: “Yet to Start,” “Early Stage,” “Making Progress,” or “Good Progress.”
The Department's previous reports New York Domestic Insurers’ Understanding and Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting for reporting year 2019, and 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 for reporting year 2020, also contain examples of good practices described in responses.
This update provides a comparison of rating levels achieved for each TCFD pillar over the reporting years 2019-2021 and shows that the most improvement occurred in ratings of governance-related disclosures. A key factor in that development was that the Department had set an August 15, 2022 implementation timeline for guidance expectations relating to governance.
As the Department has done since issuing the guidance, DFS will continue to leverage the results of the annual Climate Risk Disclosure Survey to:
- Assess insurers’ overall progress in identifying, assessing, and managing climate risks in keeping with guidance expectations, and, as appropriate, develop additional direction on implementation;
- Identify additional good practices that can be shared with the industry; and
- Support risk-based supervision by identifying insurers that appear to lag, generally or in a specific area, compared to their peers, and by engaging in bilateral discussions to understand their challenges and highlight areas for improvement.
Insurers’ ratings will be used only for DFS supervisory purposes and will not be publicly disclosed.
Webinars & Events
2024 Webinar on Banking Guidance
DFS hosted a webinar on January 11, 2024 to provide an overview of the Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial and Operational Risks from Climate Change issued by DFS. The webinar also covered key changes made after consideration of public feedback on the proposed guidance issued in December 2022.
- Watch the January 11 Guidance Overview Webinar recording (Video)
- View the January 11 Guidance Overview Webinar slide Deck (PDF)
2023 Webinar on Proposed Banking Guidance
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 January 2023 Proposed Banking Guidance Webinar recording on WebEx
- View the January 2023 Proposed Banking Guidance Webinar Slide Deck (PDF)
2022 Update Overview Webinar - Insurance
DFS hosted a webinar on August 2, 2022 to provide an overview of the 2021 Update.
- Watch the August 22 Update Overview Webinar recording on WebEx
- View the August 2022 Update Overview Webinar slide deck (PDF)
2021 Final Guidance Overview Webinar - Insurance
DFS hosted a webinar on November 22, 2021 which provided an overview of the insurance guidance, changes made to the proposed guidance that was issued for public comment, and the rationale for those changes.
- View the November 22, 2021 Final Climate Guidance Overview Recording (WebEx)
- View the November 22, 2021 Final Climate Guidance Overview Webinar Slide Deck (PDF)
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
Insurance Industry Knowledge Exchange
Webinar 1: Climate-Related Governance and Organizational Structure
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 meet the Department's expectations relating to organizational structure, by August 15, 2022.
A 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 Climate-Related Data and Tools Webinar recording (WebEx)
- View the Climate-Related Data and Tools 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:
- 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.
Insurance Industry Knowledge Exchange Webinars
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
DFS Reports
- 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 (For reporting year 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 (For reporting year 2020)
- New York Domestic Insurers’ Management of the Financial Risks from Climate Change - An Analysis of NAIC Climate Risk Disclosure Survey Responses and Other Reporting (For reporting year 2019)
- An Analysis of New York Domestic Insurers’ Exposure to Transition Risks and Opportunities from Climate Change
(Printable PDF of the climate-related resources also listed below)
Community Climate Resiliency
Community Reinvestment Act
- Community Reinvestment Act, Final Rule ((Federal Reserve Bank of New York)
- Industry Letter: CRA Consideration for Activities that Contribute to Climate Mitigation and Adaptation
- New York Banking Law § 28-b(4) (Consol. 2023)
Public Programs and Resources
- Climate Smart Communities: Certification Actions
- New York State Energy Research and Development Authority (NYSERDA) Programs
- Environmental Bond Act Frequently Asked Questions
- Hazard Mitigation Assistance Grants (FEMA)
- Environmental Bond Act Program Priorities
- National Flood Insurance Program Risk Rating 2.0: Equity in Action (FEMA)
- U.S. Department of Energy Weatherization Assistance Program
Resilience Measures
- Community Solar (NYSERDA)
- Community Solar (Solar Energy Industries Association)
- Energy Efficiency and Building Decarbonization (NYSERDA)
- The Future of Buildings: New York’s Carbon Neutral Buildings Roadmap Executive Summary (NYSERDA)
- What New Yorkers Can Do: Mitigation, Adaptation, and Resilience (New York State DEC)
Community-Level Information
- New York State Climate Act Disadvantaged Communities Criteria
- Disadvantaged Communities (NYSERDA)
- More resources are available at Environmental and Energy Law Program – Harvard Law School
Insurance as a Mitigant
- Insurance Supervision and Regulation of Climate-Related Risks (FIO, Treasury)
- More Risk: The Changing Nature of P&C Insurance Opportunities to 2040 (Swiss Re Institute)
Materiality
- Good Practices for Climate-Related and Environmental Risk Management (European Central Bank)
Operational Resiliency
- Principles for Operational Resilience (Basel Committee on Banking Supervision)
- SR 20-24: Interagency Paper on Sound Practices to Strengthen Operational Resilience (Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve (FRB), and Federal Deposit Insurance Corporation (FDIC))
Physical Risk
Data Sources
- Climate Change Effects and Impacts (NYS DEC)
- DATA.gov Climate Data Catalogue
- Climate Data Online (NOAA National Centers for Environmental Information)
- Climate Mapping for Resilience & Adaptation
- NASA Global Climate Change
- National Risk Index (FEMA)
- New York State Climate Impacts Assessment (NYSERDA)
- Observed and Projected Climate Change in New York State: An Overview (NYS DEC)
Flood Risk
- What Is Nuisance Flooding? Defining and Monitoring an Emerging Challenge (American Geophysical Union)
Impacts in New York State
- State Climate Summaries 2022 (NOAA National Centers for Environmental Information)
Mitigants and Resiliency
- Building Code Effectiveness Grading Schedule (BCEGS®) (Verisk)
- Social Vulnerability (FEMA, National Risk Index)
Risk Assessment Frameworks and Tools
- Climate Risk Technical Bulletin 2021 Edition (Sustainability Accounting Standards Board)
- Physically Fit? How Financial Institutions Can Better Disclose Climate-Related Physical Risks in Line with Recommendations of the TCFD (United Nations Environment Programme Finance Initiative and the World Resources Institute)
- The Consequences of Physical Climate Risk for Banks: Financing a Net Zero Economy (Ceres)
Risk Measurement and Metrics
- Climate-related financial risks – measurement methodologies (Basel Committee on Banking Supervision)
- Financed Emissions: The Global GHG Accounting and Reporting Standard, Part A (Partnership for Carbon Accounting Financials)
- Guidance on Metrics, Targets, and Transition Plans (Task Force on Climate-Related Financial Disclosures)
- SR 20-12: Interagency Policy Statement on Allowances for Credit Losses (FRB, FDIC, OCC, National Credit Union Administration (NCUA))
- The 2023 Climate Risk Landscape (UNEP FI)
- The Climate Risk Landscape (2021) (UNEP FI)
- The Climate Risk Tool Landscape: 2022 Supplement (UNEP FI)
Supervisory Frameworks
- Supervisory Statement SS3/19: Enhancing Banks’ and Insurers’ Approaches to Managing the Financial Risks from Climate Change (Bank of England Prudential Regulation Authority)
Scenario Analysis
- Scenarios Portal (Network for Greening the Financial System)
Transition Risk
Definitions
- Energy Intensity Indicators: Terminology and Definitions (Office of Energy Efficiency and Renewable Energy)
- Overview of Greenhouse Gases (United States Environmental Protection Agency)
Risk Drivers
- Sustainable Affordable Housing: Strategies for Financing an Inclusive Energy Transition (Federal Reserve Bank of New York)
- New York Environmental Conservation Law § 19-0306-b (2022); Air Pollution Regulatory Revisions, Emergency Rulemakings, Part 218 Advanced Clean Cars II (NYS DEC)