Superintendent of Financial Services Linda A. Lacewell today announced that the New York State Department of Financial Services (DFS) has issued proposed detailed guidance for New York-regulated domestic insurers setting out DFS’s expectations related to managing the financial risks from climate change.

The proposed guidance builds on the circular letter issued by DFS on September 22, 2020, which outlined its 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, and developing their approach to climate-related financial disclosure. DFS is seeking the interested parties’ input on the guidance, which will be finalized following a 90-day public comment period.

“This proposed guidance provides a blueprint for insurers to manage the complex financial risks of climate change,” said Superintendent Lacewell. “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. It is informed by DFS’s ongoing dialogue with the insurance industry and international regulators. 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 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.

Interested parties are encouraged to provide comments on the proposed guidance by Wednesday June 23, 2021. Instructions for providing comments can be found on the Public Consultation section of the Climate Change page on DFS’s website.

DFS will host a webinar to provide an overview of the proposed guidance on April 8, 2021 at 11am. Interested parties can register for the webinar here with password: ClimChg040821.

Read a full copy of the proposed guidance on the DFS website.

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