Senate Committee Questions Insurers on Climate

Property-casualty insurers should take note of letters sent by the U.S. Senate Budget Committee on June 9 to prominent insurers seeking information on climate-related matters. The letters are available here and seek production of information regarding these companies’ practices that bear on climate change. The letters implicate both insurance-underwriting activities and investing activities of these insurers. The letters are signed by Senate Budget Chair Sheldon Whitehouse (D-R.I.), Senator Ron Wyden (D-Ore.) and Senator Bernard Sanders (I-Vt.).

The letters ask the following, generally, and request responses by June 16, 2023:

1. On what basis does the insurer still support underwriting new fossil fuel expansion projects and investing in the fossil fuel industry? Does the insurer have plans in place to either scale back or phase out its underwriting of new and expanded coal, oil and gas projects? By when?
2. What methodology does the insurer use to evaluate its future impact on the environment and the climate as a result of its investment and underwriting decisions? What methodology does the insurer use to evaluate the impact of climate change on potential new and existing insured projects?
3. Does the insurer have a plan to ensure that its provision of insurance to oil, gas and coal companies is in line with “a credible 1.5°C pathway” (the goal of limiting global temperature increases to 1.5°C above pre-industrial levels)? If so, the insurer is asked to explain that plan. If not, the insurer should explain why it has chosen not to adopt such a plan.
4. Does the insurer plan to divest assets, including assets managed for third parties, from coal, oil and gas companies whose activities are not aligned with a 1.5°C pathway? If so, on what timeline or by what date?
5. Please provide a list of the trade associations, advocacy organizations and lobbying entities with which the insurer has a professional relationship or membership as well as the amount of money that the insurer has spent on climate-related lobbying activities over each of the past five years.
6. What is the insurer doing to evaluate its membership in those trade associations, funding of such advocacy organizations, and participation in lobbying activities, and to bring such advocacy in line with a 1.5°C pathway?
7. Does the insurer have a plan to adopt binding targets for reducing its insured emissions that are transparent, comprehensive and aligned with a credible 1.5°C pathway? If so, the insurer is asked to explain.
8. How does the insurer evaluate its responsibilities with respect to the “Free, Prior, and Informed Consent of Indigenous Peoples”? (The letter explains that “where polluting projects disproportionately impact Indigenous and other marginalized communities, the UN Declaration on the Rights of Indigenous Peoples recommends that extractors ‘obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.’”) Does the insurer have a plan for developing due diligence and verification mechanisms to ensure that both the insurer and its clients obtain and document the Free, Prior, and Informed Consent of impacted Indigenous Peoples as articulated in the UN Declaration on the Rights of Indigenous Peoples? If so, the insurer should explain.

The insurers are also asked to produce the following documents by no later than June 23:

1. Policies, memoranda or other similar documents governing the insurer’s methodology for conducting assessments of a project’s impact on climate change or the environment when evaluating requests for investment in or underwriting of fossil fuel-related projects.
2. Policies, memoranda or other similar documents concerning the insurer’s methodology for evaluating the impact of climate change on its insured projects or projects considered for underwriting.
3. Policies, memoranda or other similar documents reflecting the insurer’s analysis or projections of the trajectory of insurance rates and scope of coverage in light of rising climate harms.
4. Policies, memoranda or other similar documents concerning the insurer’s plan, or lack thereof, to scale down or phase out insuring new and expanded coal, oil and gas projects.
5. Policies, memoranda or other similar documents concerning the insurer’s plan, or lack thereof, for divesting assets, including assets managed for third parties, from coal, oil and gas companies whose activities are not aligned with a 1.5°C pathway.
6. Policies, memoranda or other similar documents concerning the insurer’s methodology, or lack thereof, for evaluating existing or possible membership in trade associations, funding of advocacy organizations, and participation in lobbying activities, especially as such activities relate to the environment or climate change.
7. Policies, memoranda or other similar documents concerning the insurer’s adherence to — especially in connection with its underwriting or investing decisions — the UN Declaration on the Rights of Indigenous Peoples and/or the Free, Prior, and Informed Consent of Indigenous Peoples.

In addition to seeking information, the letters describe various potential financial impacts on insurers due to climate change physical risks, including increased property and casualty losses due to climate-related events such as hurricanes and wildfires, and transition risks of stranded assets in the oil and gas industry losing value. It is clear that that the Democratic senators who sent the letters are using their perch atop the Senate Budget Committee to push insurers to develop policies to discontinue underwriting existing, expanding and new fossil fuel production facilities as well as investments in fossil fuels.

Although these companies are neither members of the Net-Zero Insurance Alliance (NZIA) nor signatory companies to the United Nations Principles for Sustainable Insurance, when responding to these questions, insurers should be mindful of the recent letter sent by over 20 state attorneys general questioning other insurance carriers’ environmental, social and governance (ESG) programs, specifically as they relate to reducing greenhouse gas emissions associated with insurance portfolios.