California’s new insurance commissioner wasn’t getting along so well on Earth Day with groups of climate change and consumer activists.
California Insurance Commissioner Ricardo Lara, who put battling climate change on top of a liberal and consumer friendly platform on his way to winning election as commissioner, rejected a petition urging him to place new regulations on insurers to disclose what projects in the fossil fuel industry they underwrite.
More than 60 environmental, consumer and social justice organizations in March delivered the petition to Lara.
As he took office in January, Lara pledged to help residents recover from wildfires while defeating the threat of climate change. He also created a new deputy commissioner for climate and sustainability role on his team. On Monday, to celebrate Earth Day, he launched Climate Smart 2020, an effort to reduce his department’s carbon footprint.
He also rejected the petition on Monday.
The petition called for Lara to immediately initiate a rulemaking proceeding and promulgate emergency regulations to require all insurance companies licensed to conduct business in California to fully disclose all their investments in fossil fuel-related entities, and all the fossil fuel-related companies and projects that they underwrite or otherwise insure.
The petition also sought to expand disclosure of insurance companies’ fossil fuel-related investments. The California Department of Insurance’s Climate Risk Carbon Initiative currently requires disclosure of fossil fuel-related investments by insurance companies writing more than $100 million in premiums.
Lara outlined his reasoning for the rejection, including the need for a broader approach and a stronger need for collaboration between the industry, the California Department of Insurance and climate change activists.
“The Commissioner declines to grant the Petition at this time,” Lara’s response states. “While the Commissioner shares the Petitioners’ concerns about the effects of climate change and potential risks to consumers and insurance companies, the Petition only targets a single element of the much broader challenge of climate risk. The Commissioner is pursuing a much more comprehensive climate strategy, which will include incentivizing climate smart investments, and invites the Petitioners, consumers, and the insurance industry to work with him in realizing a comprehensive climate strategy.”
Consumer Watchdog, one of the petitioners, following Monday’s rejection issued a strongly worded press release on Tuesday, noting that “On Earth Day, California Insurance Commissioner Ricardo Lara chose ‘collaboration’ with the insurance industry over urgent climate action.”
“Commissioner Lara positions himself as a climate champion yet rejected this simple step towards transparency,” Carmen Balber, executive director of Consumer Watchdog, said in a statement. “Every new scientific study finds the climate threat is more urgent than the last. In denying this petition, Commissioner Lara denies that urgency in favor of more talk and ‘collaboration’ with the insurance industry. By refusing to acknowledge the insurance industry’s role in causing global warming, he’s abdicating California’s leadership role in combating climate change.”
Lara in his rejection letter writes that he will seek a comprehensive approach to mitigating climate risk that is “built on analysis, innovation, and cohesive policies,” which bring insurers into the fight against climate change.
“Achieving a sustainable insurance sector in California that reduces climate risks will require innovative products to promote mitigation and adaptation, thoughtful assessment of physical and transition risks, collaboration with insurers and state regulators, expanding information on hazards throughout the state, and laws intended to implement effective policies,” Lara writes.
Lara also expressed concerns about the call to require insurers to disclose what fossil fuel-related companies and projects they underwrite.
“For example, if the public had the ability to review the policy limits and coverage of specific businesses, such information could be used for purposes inconsistent with climate goals by exposing and severely impairing a business’s internal strategies and efforts to transition from fossil-fuel energy to renewable energy,” Lara writes.
California has already moved to get insurers to disclose their investments in fossil fuels.
Former Insurance Commissioner Dave Jones in 2016 called on insurance companies to voluntarily divest from thermal coal investments and required insurers with more than $100 million in annual premium to disclose publicly their investments in fossil fuels.
Jones also established the Climate Risk Carbon Initiative, which includes information on the amount of oil, gas, coal and utilities investments held by insurance companies, and whether the insurers have divested from thermal coal, the amount of thermal coal divested and any future commitments to divest.
The petition calls for even more requirements on the disclosure of insurer fossil fuel investments.
Greenpeace USA Executive Director Annie Leonard said Lara’s decision was a gift to insurers.
“Insurance Commissioner Lara’s decision not to pursue common sense disclosure is a gift to those insurance companies which continue to underwrite coal, oil and gas,” Greenpeace USA Executive Director Annie Leonard said in a statement. “By refusing to use his authority to hold insurance companies accountable for their continued support of fossil fuels, Commissioner Lara has decided that the profits of a handful of irresponsible insurance companies are more important than the fight against dangerous climate change.”
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