|  The New York State Department of Financial Services (DFS) on Tuesday told insurance carriers that it expects them to begin considering the financial effects of climate change if they are not already. While the department did not call for immediate action by insurance agents and brokers, you should expect to see changes in carrier underwriting guidelines.
DFS described the purpose of its circular letter to carriers as "to outline DFS’s expectations for the industry and begin a dialogue as to how DFS can best support your institutions’ efforts to manage the financial risks from climate change." The letter pointed to the increasing cost of climate-related natural disasters. "These risks," it said, "directly affect property/casualty insurers’ liabilities and the long-term viability of certain business lines." While praising certain insurers for the steps they've already taken to manage these risks, the letter said that the industry needs to do more and that DFS is prepared to help them. The letter promised that DFS will publish detailed guidance "consistent with international best practices on climate-related financial supervision," and invited industry input. The department will organize a series of webinars to allow the exchange of ideas and lessons learned among industry participants. In the mean time, the department said that it expects insurers to "start integrating the consideration of the financial risks from climate change into their governance frameworks, risk management processes, and business strategies." The letter acknowledged that every insurer's situation is different. "DFS understands that climate change affects each insurer in different ways and to different degrees depending on the insurer’s size, complexity, geographic distribution, business lines, investment strategies, and other factors," it said. "DFS appreciates that insurers do not have the same level of resources to manage these risks and are at different points in the process of incorporating these risks into their governance, strategy, and risk management."
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