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Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
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major disruptions of private insurance coverage in U.S. markets that are particularly vulnerable to climate change impacts; facilitate mitigation and resilience for disasters.
Growing evidence indicates that climate change may be associated with a decline in the availability and affordability of insurance provided by the private sector i.e., private insurance coverage in certain markets.26 The creation and expansion of insurers of last resort by individual U.S. states and the federal government highlights this problem.27 FIO intends to examine the insurability of disasters that are produced or exacerbated by climate change, including wildfires, hurricanes, floods, wind damage, and extreme temperatures.
Additionally, traditionally underserved communities and consumers, minorities, and lowand moderate-income persons may have disproportionate challenges in obtaining affordable property insurance to cover the risks posed by climate-related disasters; further declines in available and affordable insurance could exacerbate the inequities that these persons face.28 This situation underscores the need to identify solutions to address the growing protection gap exacerbated by climate change.29 Therefore, FIO also intends to assess the availability and affordability of insurance coverage in high-risk areas, particularly for traditionally 26 See, e.g., FIO, Annual Report on the Insurance Industry September 2020, 5960, https
home.treasury.gov/system/files/311/2020-FIOAnnual-Report.pdf. See also Exec. Order No. 14,030
3bi directing FIO to assess the potential for major disruptions of private insurance coverage in regions of the country particularly vulnerable to climate change impacts as distinct from insurance provided by or backed by a government entity, such as the federal NFIP. emphasis added.
27 See, e.g., California FAIR Plan Property Insurance, https www.cfpnet.com; About Us:
Who We Are, Citizens Property Insurance Corporation, https www.citizensfla.com/who-weare; Congressional Research Service, Introduction to the National Flood Insurance Program NFIP, Report No. R44593 Jan. 5, 2021, 1, https fas.org/
sgp/crs/homesec/R44593.pdf.
28 See, e.g., Rachel Morello-Frosch, et al., The Climate Gap: Inequalities in How Climate Change Hurts Americans & How to Close the Gap 2018, 17, https dornsife.usc.edu/assets/sites/242/docs/
ClimateGapReport_full_report_web.pdf.
29 See, e.g., Aon 2020 Cat Insight Annual Report;
Federal Advisory Committee Protection Gap Subcommittee, Addressing the Protection Gap Through Public/Private Partnerships & Other Mechanisms, December 5, 2019, https
home.treasury.gov/system/files/311/
December2019FACI_
ProtectionGapPresentation.pdf; ACPR, A First Assessment of Financial Risks Stemming from Climate Change: The Main Results of the 2020
Climate Pilot Exercise, No. 1222021 2021, 60, https acpr.banque-france.fr/sites/default/files/
medias/documents/20210602_as_exercice_pilote_
english.pdf.

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underserved communities and consumers, minorities, and lowand moderate-income persons.
Beyond analyzing potential insurance market disruptions, FIO intends to look at solutions, including identifying best practices for mitigation that can then increase post-disaster resilience, including solutions that can help ensure sufficient availability and affordability of insurance for consumers in light of increasing climate-related disaster risk.
In addition, FIO will examine the role of insurers in supporting climate resilience in critical infrastructure, as well as in supporting green investment initiatives.
3. Insurance Sector Engagement:
Increase FIOs engagement on climaterelated issues; leverage the insurance sectors ability to help achieve climaterelated goals.
FIO plans to increase its engagement on climate-related issues and take a leadership role in analyzing how the insurance sector may help mitigate climate-related risks. Throughout this work, FIO will engage with stakeholders, including through this RFI. Additionally, the insurance sector has the ability to shape industries, products, and practices through its functions in the financial markets and broad understanding of risk. Thus, it can influence climate-related activity of other sectors of the U.S. economy. FIO
therefore will engage with the insurance sector to assess how the sector may help achieve national climate-related goals, including mitigation, adaptation, and transition to a lower carbon economy.
This could include insurance sector consideration of underwriting activities, investment holdings, and business operations to support a low emissions economy.30 It also could encompass insurance sector transition of its operational and attributable greenhouse gas GHG emissions.31 In addition, FIO
30 See, e.g., U.N. Environment Programme Finance Initiative, The Net Zero Insurance Alliance, Statement of Commitment by Signatory Companies July 2021, 1 n. 1, https
www.unepfi.org/psi/wp-content/uploads/2021/07/
NZIA-Commitment.pdf.
31 GHG includes Scope 1, 2, and 3 emissions.
Scope 1 emissions are direct GHG emissions that occur from sources controlled or owned by an entity such as an insurer. Scope 2 emissions are indirect GHG emissions associated with purchase of electricity, steam, heat, or cooling by an entity.
Scope 3 emissions are all other indirect GHG
emissions not covered by Scope 2 and where an entity may impact in the value chain, such as business travel and investments. For insurers, Scope 3 emissions would include the Scope 1, 2, and 3 emissions by policyholders when significant and when data is available to determine them.
See, e.g., Scope 1 and Scope 2 Inventory Guidance, U.S. Environmental Protection Agency EPA, https www.epa.gov/climateleadership/
scope-1-and-scope-2-inventory-guidance; Scope 3

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plans to consider ways to address the lack of common methodology and standardization in measuring financed emissions, particularly those of nonpublic companies in which the insurance sector underwrites and invests. Currently, only one state has passed legislation that is intended to leverage the insurance sectors ability to affect GHG emissions.32
I. Request for Comments Below, FIO invites public comments on a series of questions. The responses to this RFI will help inform FIOs assessment of the implications of climate-related financial risks for the insurance sector. It also will help FIO
better understand 1 which data elements are necessary to accurately assess climate risk; 2 which data elements remain unavailable; and 3
how FIO could collect this data and make it available to stakeholders as needed. Access to high-quality, reliable, and consistent data will be necessary for accomplishing all three of FIOs initial climate-related priorities. FIO also will identify and issue recommendations on individual actions that can be taken by various insurance sector stakeholders such as state insurance regulators, insurers, and policyholders to address climate-related financial risks and facilitate the U.S. insurance sectors transition to a more sustainable future.
FIO recognizes that an effective policy response to climate-related financial risk requires an iterative approach and intends to adjust its work and priorities as needed.
Executive Order on Climate-Related Financial Risk 1. Please provide your views on how FIO should assess and implement the action items set forth for FIO in the Executive Order on Climate-Related Financial Risk.33
FIOs Initial Climate-Related Priorities 2. Please provide your views on FIOs three climate-related priorities and related activities, particularly with regard to whether there are alternative or additional priorities or activities that FIO should evaluate regarding the impact of climate change on the insurance sector and the sectors effect on mitigation and adaptation efforts.
Inventory Guidance, EPA, https www.epa.gov/
climateleadership/scope-3-inventory-guidance.
32 Claire Wilkinson, Connecticut Bill Calls for Regulation of Insurers Climate Risks, Business Insurance, June 17, 2021, https
www.businessinsurance.com/article/20210617/
NEWS06/912342605/Connecticut-bill-calls-forregulation-of-insurers%E2%80%99-climate-risks.
33 Exec. Order No. 14,030 3bi.

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