In PIA Victory, FIO Cancels Climate Data Collection Plan, Allowing NAIC to Lead Data Call

On By Lauren Pachman, Counsel & Director of Regulatory Affairs

In a win for PIA, consumers, and supporters of the state insurance regulatory system, the Federal Insurance Office (FIO) announced that it was abandoning its unprecedented effort to collect data on climate-related risks from property and casualty insurance carriers on behalf of the federal government. Instead, the National Association of Insurance Commissioners (NAIC) will now lead this effort. For the past three years, the FIO, which is housed within the Treasury Department, had been pursuing this carrier data call as part of the Biden administration’s expansive efforts to address climate-related financial risks, beginning with its 2021 Executive Order (EO) asking the FIO to assess climate risks to carriers and identify sources of coverage disruption in geographic areas prone to climate change.

Emboldened by the 2021 EO, the FIO contacted state insurance departments to request very granular data about property insurance coverages, liabilities, and losses. It followed that request with an announcement of its intent to conduct a climate-related financial risk data call, and PIA promptly raised concerns about the propriety of the FIO engaging in such activities. The FIO continued to pursue this course of action even as the frequency with which insurers pull out of high-risk areas has increased apace. The FIO also released a report last year calling on insurers and state regulators to ramp up efforts to evaluate climate impacts.

Undeterred by the growing alarm among members of industry, including PIA, the FIO followed this by issuing a Notice of Information Collection and Request for Comment (NIC/RFC) on its planned data collection of climate-related financial risk information associated with U.S. homeowners’ insurance underwriting. PIA reiterated its opposition to the FIO leading this effort, pointing out that state insurance regulators are best placed to know what information to collect and how. PIA’s comments highlighted the flaws in its plan, noting that it was a burden on small or regional insurers; a poor design for nationwide analysis at a ZIP code level; duplicative of existing state insurance regulatory efforts to gather similar and more useable data; and demonstrated a lack of understanding of state insurance regulatory reporting requirements.

PIA also pointed out that the FIO’s efforts did not comply with existing federal law, which obligates the FIO to request data from state insurance regulators before demanding it directly from insurers. Thankfully, the FIO data call is being replaced by a novel arrangement with state insurance regulators and the NAIC, which had previously been pursuing its own, separate data collection effort. The new plan will find the FIO partnered with the NAIC, which will spearhead the effort to collect the information and is scheduled to begin sharing its results with the FIO later this year.

The FIO’s delayed acknowledgement this week that the NAIC is well-suited to the collection of carrier data validates PIA’s long-held concerns with its intent to conduct the data call itself. PIA is optimistic that the NAIC, which routinely engages in industry data collection, will do so in a way that minimizes the burden on insurers and seeks usable and valid data.

Going Forward

The FIO’s long-overdue correction highlights the need for the FIO to be repealed or, at a minimum, meaningfully reformed. PIA has been at the forefront of these efforts and has developed legislative proposals to repeal or reform the office.

The Insurance Data Protection Act, H.R. 5535/S. 3349, introduced by Rep. Scott Fitzgerald (R-WI) and Sen. Katie Britt (R-AL), would eliminate the FIO’s power to issue subpoenas, which makes its involvement in data calls a substantial threat to the primacy of state insurance regulation. Eliminating its subpoena authority takes away the FIO’s most powerful tool. The bill would also set forth confidentiality procedures and disclosure requirements governing the way financial regulators can use insurance carrier data, once collected. Finally, it would protect consumers by limiting the sharing of non-publicly available data with or by the FIO and other federal agencies and state insurance regulators. In sum, the Insurance Data Protection Act would reset the proper balance of power between the FIO and state insurance regulators.

The Federal Insurance Office (FIO) Elimination Act, H.R. 2933/S. 1694, is sponsored by Rep. Ben Cline (R-VA) and Sen. Ted Cruz (R-TX). The FIO Elimination Act would permit the Treasury Department to complete tasks currently assigned to the FIO, like engaging in international negotiations and administering the Terrorism Risk Insurance Program. However, its passage, and the elimination of the FIO, would greatly reduce the threat of a wholesale federal takeover of the insurance industry by eliminating an unnecessary administrative office that relentlessly seeks to expand its own powers.    

PIA will continue to monitor the FIO’s activity on climate risk and support legislation to repeal or reform the FIO to neutralize this threat against the state insurance regulatory system.