The Climate-related Financial Risk Committee (CFRC) of the Financial Stability Oversight Council (FSOC) reported noteworthy progress in addressing climate-related financial risks, highlighting interagency collaboration and risk assessment efforts. The Committee said significant progress had been made in the fight against climate-related financial risks, according to a July 28 news release.
After the commitment was made in the FSOC Climate Report in October 2021, the CFRC, which is composed of members from a variety of FSOC member agencies, has been actively operating ever since it was established in February 2022, the release reported.
The committee's achievements since it issued its previous report in July 2022 are the primary subject of the release. It is still utilized by government agencies as a gathering place for the purpose of discussing climate-related financial risk, exchanging data and improving each other's capabilities.
The CFRC has also been vital in increasing communication among FSOC members and adopting shared procedures and standards. This has been accomplished through the working groups it has established for data, scenario analysis, and risk assessment, according to the release.
The agency is attempting to construct a comprehensive framework for recognizing and evaluating the financial risk that is caused by climate change. In addition to that, one of their goals is to produce a preliminary set of risk indicators that will be geared toward banking, insurance and financial markets in order to have a better understanding of the financial risks that are related with climate change, the release said.
The Federal Insurance Office (FIO), part of the Department of the Treasury, is also taking part in this initiative by asking members of the general public for their comments on a proposed data collection from property and liability insurers. There will be current and historical information regarding the underwriting of homeowner's insurance at the ZIP code level supplied, the release reported.
The objective of this study is to determine the chance that significant holes will exist in private insurance coverage in regions that are anticipated to be most severely impacted by climate change, according to the release.
A number of different regulatory authorities are working to solve the problem of effectively managing the financial risks related with climate change. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System have made available for public comment a set of proposed principles for managing financial risks associated with climate change at certain large financial institutions. These principles are intended to help these institutions manage the financial risks that are associated with climate change, the release said.
FIO also issued a comprehensive document with the title "Insurance Supervision and Regulation of Climate-Related Risks," in which FIO examines the challenges and gaps that exist in the current system of monitoring and regulating insurers in relation to climate change. The report provides recommendations for public policy in order to address these issues.