The NAIC’s Role in Addressing Climate-Related Insurance Challenges: Solvency and Cross-Jurisdictional Coordination
- IRES
- 11 hours ago
- 9 min read
Climate change presents a paradox for the insurance industry. On one hand, climate risk is global in scope, often calling for coordinated international responses. On the other hand, insurance regulation in the United States remains fundamentally local—premium pricing varies by individual and location, regulatory authority rests primarily with the states, and risk exposure differs dramatically across regions. This tension is compounded by the unpredictable nature of climate-related catastrophes, which can affect insurers, consumers, and entire markets in ways that vary significantly depending on the nature of the event and the geography involved. Unlike other industries where climate change may be more of an existential, rather than immediate concern, climate change is directly intertwined with the daily work of the insurance industry. Harvard’s Institute for Business in Global Society reported that climate change and extreme weather events are driving up costs and creating volatility in homeowner insurance markets.[1]
Federal policymakers have increasingly recognized these risks. In January, members of the United States Senate introduced legislation “to establish the Climate Financial Risk Committee and Climate Financial Risk Advisory Committee on the Financial Stability Oversight Council,”[2] with the aim of assessing how property and casualty insurance availability and affordability trends affect credit markets, housing finance, and financial stability. This legislative effort follows a 2024 Senate investigation into homeowners’ insurance conditions nationwide. The investigation concluded that “climate change . . . is driving increasing non-renewal rates, as the counties that are most exposed to climate-related risks such as wildfires or hurricanes are the counties seeing the highest non-renewal rates.”[3]That report characterized climate change as an economic threat to the insurance sector.
State insurance regulators have faced difficulties addressing climate change on their own, to the point that some commentators have proposed stepping away from insurance-focused regulation as a solution to climate catastrophes altogether. The Harvard report argued that differences in state regulation allow insurers to shift costs from highly regulated states onto those with lighter oversight, inadvertently encouraging construction in high-risk areas. It suggested that land-use restrictions in vulnerable zones might be more effective than insurance regulation—while acknowledging the local political difficulties such restrictions would entail. This reveals the need for a solution to the ongoing question of which entities can provide actionable solutions without overstepping existing governance structures.
Against this backdrop, the National Association of Insurance Commissioners (NAIC) occupies a distinct position. As an organization that facilitates coordination among state regulators without possessing direct statutory authority over insurers, the NAIC can bridge the gap between local regulatory frameworks and the broader challenges posed by climate risk. This article examines the NAIC’s role in producing guidance on climate and catastrophe insurance. Based on a review of the NAIC’s publications and policy work, the NAIC should be considered a critical entity in solving the insurance aspects of the climate crisis. Because of its collaborative nature, ability to collect data, and practice of hosting discussions across jurisdictions, the NAIC is well equipped to find solutions and provide oversight on issues of insurer insolvency. The NAIC should be considered a key authority in the future of climate change-related governance at the local, state, and international levels.
I. Insolvency
Insolvency is a central concern in the climate-insurance crisis. The case of FedNat, a Florida-based property insurer that declared bankruptcy and entered liquidation following losses from Hurricane Ida, illustrates the threat that climate catastrophes pose to carrier solvency.[1] The NAIC has devoted substantial attention to this issue. Given its understanding of multiple insurance lines and access to extensive data, the NAIC is well positioned to address solvency issues arising from climate risk.
As early as 2005, the NAIC began examining the implications of climate change for the insurance industry, hosting scientific presentations and public hearings that led to the creation of the Climate Change and Global Warming (EX) Task Force (CCGW). In 2008, CCGW published a white paper calling on regulators to work with the insurance industry to examine climate impacts and implement regulatory changes to protect consumers.[2] The white paper addressed solvency concerns, challenges facing property and casualty insurers, the role of government, and disclosure strategies.
On solvency, the white paper emphasized that although climate impacts vary by line of business, solvency remains a cross-cutting concern. The white paper further observed that climate change would challenge existing methods for regulating insurance investment practices, while mitigation efforts—such as the adoption of renewable energy—would create new investment opportunities. The NAIC can serve as an effective source for aggregating information and providing guidance for states overseeing insurer investments.
Building on this foundation, the NAIC subsequently established the Natural Catastrophe Risk and Resilience (EX) Task Force (NCRR), which coordinates diverse stakeholders—including households, insurance regulators, policymakers, and representatives of the insurance and other industries—for the purpose of building climate resilience strategies.[6] NCRR’s objectives include closing protection gaps, developing blueprints for flood insurance reform, addressing data deficiencies, promoting risk mitigation, and expanding regulators’ use of solvency tools to test climate resilience.
In 2024, NCRR published the National Climate Resilience Strategy for Insurance, developed in consultation with NAIC members nationwide and informed by existing programs in member jurisdictions. The Resilience Strategy identified national data collection on insurance availability and affordability as a priority that would help federal, state, and local governments implement risk mitigation funding more effectively. Through its quasi-regulatory role, the NAIC collects data and convenes stakeholders across jurisdictions to share ideas and develop solutions that might not emerge at the local level alone—while also incorporating perspectives from homeowners and individual companies. As NCRR noted, “[t]he NAIC also collects information on investments made by insurance companies, which is used by state insurance regulators and external stakeholders to monitor that insurers are well positioned to ensure their financial solvency. This information can also be used for analysis of potential climate-related risks.”[7]
NCRR has also articulated specific solvency-related goals, emphasizing that solvency oversight is a critical component of insurance regulation.[8] The task force aims to embed climate stress testing and climate scenario analysis into routine financial analysis, data collection, and financial surveillance. In a progress report, NCRR recommended adding wildfire peril to the Risk-Based Capital (RBC) framework for catastrophe risk exposures. The NAIC’s RBC formula determines the minimum capital an insurer must hold based on its risk profile and serves as a fundamental tool for monitoring capital adequacy. State regulators continually update RBC charges to reflect the evolving risk landscape. This recommendation builds on 2017 enhancements that expanded the catastrophic risks quantified in the RBC formula—specifically, hurricane and earthquake risk—to recognize increased exposure to catastrophic events.
Additionally, NCRR recommended that the NAIC enhance its solvency oversight tools and update the Own Risk and Solvency Assessment (ORSA) guidance manual.
These recommendations reflect a dual focus for the NAIC’s approach to insolvency issues: strengthening state regulatory frameworks by improving the effectiveness of their oversight tools, and supporting individual insurers by updating guidance that informs their internal risk management processes.
II. The NAIC and Climate Governance
A. National, State, and Local Dimensions
As a coordinating body rather than a state insurance regulator, the NAIC is uniquely suited to convene stakeholders and aggregate information across local, state, and national levels. Since 1871, the NAIC has served as a collaborative forum with the mission of protecting consumers while maintaining fair, competitive, and healthy insurance markets. The NAIC issues guidance, educational materials, reference guides, and model rules that states may adopt in whole or in part. Unlike a federal agency with preemptive authority, the NAIC considers state norms and encourages regulatory uniformity through consensus rather than mandate. This collaborative approach enables the NAIC to draw upon the collective experience of all U.S. jurisdictions in addressing complex climate-insurance issues.
NCRR’s work exemplifies this approach. The task force focuses on “closing insurance protection gaps for vulnerable communities” and advancing international sustainable development goals by promoting “early warning systems, pre-disaster preparedness, climate-related disclosure policies, resilient building codes and structures, and strengthening insurance supervision and transparency.”[9] At the local and national levels, NCRR’s pre-disaster mitigation efforts have included consumer surveys revealing a gap between homeowners who express willingness to reduce climate risk and those who actually undertake property improvements. In response, the NAIC coordinated with the Federal Emergency Management Agency (FEMA) to identify opportunities for collaboration and expand state regulators’ access to federal resiliency funding.
The NAIC has also developed a dashboard cataloging risk mitigation programs, enabling states to learn from and replicate successful programs in other jurisdictions. NAIC groups regularly convene discussions with researchers and technology innovators to evaluate products and solutions that may reduce catastrophe-related harm, connecting these innovators with state regulators best positioned to implement their services.
Beyond convening stakeholders, the NAIC fulfills a vital function as a collector and organizer of data. In addition to surveying consumers, the NAIC surveys insurance companies for solvency purposes and to develop a comprehensive understanding of market conditions. For example, the NAIC has issued the Homeowners Market Data Call, with responses due July 15, 2026, which is expected to capture approximately 98% of the market in most states and expand beyond traditional homeowners policies to include state-specific information. The data call now requires reporting on wildfire deductibles and nonrenewals tied to specific hazards. It encompasses U.S. insurers that have written $50,000 or more in homeowners and fire insurance premiums in any year from 2018 to 2025, with a publicly available report planned for 2027. Data of this scope, collected across multiple jurisdictions, provides regulators with a comprehensive view of potential solutions to climate-related challenges. The NAIC’s capacity to coordinate stakeholders at every level of government, combined with its extensive data holdings, makes it an indispensable resource for addressing climate and catastrophe insurance issues.
B. International Collaboration
The NAIC’s work extends beyond U.S. borders, reflecting the inherently international nature of climate risk. As an organization that aggregates data on insurers across the United States, the NAIC can demonstrate leadership and leverage its expertise in international forums. This exchange of knowledge benefits both domestic and foreign stakeholders by promoting improved climate considerations globally.
NCRR’s progress report noted that its five core workstreams align with the climate initiatives of the International Association of Insurance Supervisors (IAIS) and the United Nations Sustainable Development Goals. The report highlighted NAIC leadership on international boards, underscoring the value of the NAIC’s expertise on insurance risks. This engagement benefits the international community while also serving U.S. insurers and reinsurers with cross-border operations. As the report observed, because insurance and reinsurance companies operate across jurisdictional boundaries, the NAIC’s collaboration with international regulators is essential for “effective gathering of information and creating harmonized strategies to ensure competitive insurance markets for consumers.”
International developments have also influenced U.S. practice. After New Zealand, Switzerland, France, and Japan implemented climate risk disclosures for their insurers, several U.S. states followed suit. The NAIC drew on these international models to offer an updated survey, aligning its questions with those used by international climate monitoring entities. The updated disclosure framework “reduces duplication for insurance companies, enables state insurance regulators to better evaluate climate risk to insurance companies, and provides the public information on best practices and an understanding of big-picture trends in how insurers are approaching the climate risks the insurance sector is facing, and works to fill critical climate data gaps.”
III. Conclusion
The insurance industry confronts climate risk at every level—from individual policyholders facing nonrenewal to carriers grappling with catastrophic losses that threaten solvency. The NAIC offers a valuable institutional response. By convening stakeholders, aggregating data, and encouraging regulatory coordination without supplanting state authority, the NAIC bridges jurisdictional divides in ways that purely state-based or federal approaches may not. Its work on solvency tools, including RBC enhancements and ORSA guidance, strengthens individual carriers and state regulators alike. Its collaboration with FEMA, data calls and dashboards connect local actors to national resources. And its engagement with the IAIS and adoption of international disclosure standards position U.S. regulators within a global conversation on climate risk.
While the NAIC has taken an active role in investigating the intersection between climate, catastrophes, and insurance since 2005, concerns of insurer solvency and communication between diverse stakeholders are ongoing. Consumers have advocated for increased transparency and granularity in data the NAIC makes publicly available, and the NAIC must continue to balance these interests against the need for transparency from insurers. It is critical that the NAIC continues to collaborate with concerned policyholders, insurance companies, and traditional regulatory authorities in order to meet its goal of ensuring a fair, competitive, and healthy insurance market that can weather climate catastrophes for the future.
[1] Climate Change is Upending Homeowners Insurance Nationwide, Bill Ainsworth and Susan Mulligan, Harvard Business School Institute for Business in Global Society (Aug. 21, 2025).
[2] Addressing Climate Financial Risk Act of 2026, S.3711, 119 Cong. (2026 Proposed)
[3] Next to Fail: The Climate-Driven Insurance Crisis is Here- And Getting Worse, Senate Budget Committee at p. 4, (Dec. 18, 2024)
[4] They Survived the Hurricane. Their Insurance Company Didn’t., Zoya Teirstein, Grist (Nov. 4, 2025).
[5] The Potential Impact of Climate Change on Insurance Regulation. National Association of Insurance Commissioners, (2008).
[ https://content.naic.org/sites/default/files/inline-files/cipr_potential_impact_climate_change.pdf ]
[6] National Climate Resilience Strategy for Insurance, National Association of Insurance Commissioners at p. 4 (March 2024).
[7] June 2023 Progress Report, Executive Committee Task Force on Climate and Resiliency, National Association of Insurance Commissioners at p. 3 (June, 2023)
[8] National Climate Resilience Strategy for Insurance, National Association of Insurance Commissioners at p. 10 (March 2024).
[9] June 2023 Progress Report, Executive Committee Task Force on Climate and Resiliency, National Association of Insurance Commissioners at p. 4 (June, 2023)
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