New York Department of Financial Services Issues Proposed Guidance on Financial Risks of Climate Change for Insurers: Detailed Guidance Would Establish Expectation That Insurers Integrate Consideration of Climate Risks Into Governance, Operations, Risk Management, Scenario Analysis and Disclosure

Sullivan & Cromwell LLP - March 31, 2021
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The New York State Department of Financial Services has issued detailed proposed guidance for how New York insurers should analyze and manage the financial risks of climate change. The proposed guidance is among the first detailed statements from a U.S. financial regulator on how financial institutions are expected to analyze and manage the risks posed by climate change, which DFS described as “one of the most critical risk-management issues of our generation.” DFS is seeking public comment on the proposed guidance by June 23, 2021. In addition, on March 24, 2021, a group of U.S. senators sent a letter to eight leading U.S. insurers requesting information about climate change and their underwriting and investment policies as they pertain to coal and other carbon-intensive projects.

The proposed guidance and letter come as U.S. financial regulators and policy makers increasingly focus on the potential systemic risk that climate change may pose to the financial sector.

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