Before he stepped down as California’s Insurance Commissioner in January 2019, Dave Jones released a third annual report detailing how the state’s insurance companies invested in fossil fuel companies, including thermal coal, oil, gas, and public utilities. He also revealed that 57 insurers had committed to divesting some or all of their thermal coal investments since he began releasing the report in 2016.

“That was a big event in the insurance world,” said Jay Bruns, Senior Climate Policy Advisor for the Washington State Office of the Insurance Commissioner. “Generally, the role of the regulator is to make sure that companies remain solvent and that their investment portfolios aren’t too risky. They don’t often get asked by their regulator about exactly what they are holding.”

As the impacts of climate change continue to make themselves felt, insurance companies are on the front lines. Because they typically are the ones who pay for damages after increasingly severe weather events, most large insurers have already been exploring ways to build resilience and mitigate effects. Now, that focus has grown to include whether investment portfolios involve the fossil fuel industry, a significant contributor to carbon emissions driving climate change.

insurance, climate change

Jay Bruns and Commissioner Mike Kreidler at the International Association of Insurance Supervisors (IAIS) meeting in Luxembourg in November 2018.

As a key player on both national and international committees on the subject, Washington State Insurance Commissioner Mike Kreidler plays a central role. “There’s a debate about how rating agencies look at new investment vehicles like green bonds,” said Bruns. “Our department has been facilitating that conversation. The idea is at a nascent stage.”

No regulations currently exist in the United States regarding how insurance companies invest. In recent years, however, Kreidler’s office has implemented several changes to help track how the nearly 700 insurers operating in Washington State are managing climate change.

Along with insurance regulators in California, New Mexico, Connecticut, New York and Minnesota, Kreidler’s office issued an annual Climate Risk Disclosure Survey from the National Association of Insurance Commissioners (NAIC) to every company writing at least $100 million in premiums in their states each year. The eight-question survey asks insurers to provide a description of how they incorporate climate risks into their mitigation, risk-management, and investment plans.

insurance, climate change

Commissioner Mike Kreidler. Photo by Easton Richmond.

Kreidler was also instrumental in getting climate resilience questions into the NAIC’s Financial Examiner’s Handbook.

“It’s traditionally a very straight accounting of financial metrics that have nothing to do with climate change or the environment,” said Bruns. “Now they’ve added several questions to their handbook such as, ‘Is your company taking climate change into account as you’re looking at your portfolio?’ Our office was very involved in getting those questions answered.”

Since 2007, Kreidler has chaired the Climate Change and Global Warming Working Group at the NAIC, which includes insurance commissioners from all 50 states. He’s also a member of the Sustainable Insurance Forum, an international group of regulators seeking to strengthen their understanding of and responses to sustainability issues in keeping with the United Nations’ Principles for Sustainable Insurance.

“The commissioner is personally very committed to having insurers be part of the solution when it comes to climate change,” said Bruns.  “He would love to have more companies make investments that support the move toward a low carbon economy.”