Indiana officials will not impose climate regulations on insurance companies, making it the first state to abandon the landmark measure before it goes into effect nationwide this spring.
Several other states are also signaling hesitancy to administer the 12-question survey aimed at gauging the multibillion-dollar industry's readiness for the potential of rising claims from earthly catastrophes and investments battered by proposed energy regulation.
The growing trepidations come as survey supporters are trying to gather commitments from states to put the regulation into play. Time is growing short. Companies are required to respond by May 1. Yet doubts among regulators about the impacts of climate change and their ability to do anything about them are laying cracks in the road to enactment.
"If I thought some cataclysmic climate change was gonna happen in the next five or 10 years, I'd be more serious about this," said Scott Richardson, the insurance regulator in South Carolina. "I think this is a long, long haul, is what I'm saying. I just don't think it's imminent."
Mirroring a handful of other commissioners, Richardson hasn't decided whether to make BlueCross BlueShield of South Carolina -- the only company in the state that would be required to respond to the "climate risk survey" -- answer the questions. He's "lukewarm" to the idea.
The survey emerged from controversy last March when it was unanimously accepted by the National Association of Insurance Commissioners, a collection of all state regulators. It marked the end of a contentious year in which the two-page regulation was hotly debated and rewritten several times. Nearly every industry group supported the final version. It was a major victory.
Now there's new opposition. Some of it echoes the pointed partisanship that swirls around the issue of climate change, which scientists say with near-consensus will reveal itself through risky events such as increasingly violent storms and the accelerating rise of ocean levels.
Conservative agendas and anti-Obama ideology
Indiana is rejecting the survey because it seems to advance a "politically driven agenda" that might meddle in the investment decisions of insurance companies, said Doug Webber, the state's acting insurance commissioner.
"Indiana maintains its ideological position that it will not require a domestic company to complete the survey. If they want to do so voluntarily, that is a decision they can make internally," Webber said.
Indiana Gov. Mitch Daniels, a Republican, advised the department to avoid the regulation. Administering it might run counter to his position against proposed federal legislation that aims to reduce the use of fossil fuels like coal by providing financial advantages to renewable power producers, Webber said.
Daniels has referred to cap and trade as President Obama's "imperial climate change policy," which would benefit lower-carbon coastal states while driving jobs in Indiana, and other "humble colonials," to China.
Indiana might be alone. No other states have informed Joel Ario, the insurance commissioner of Pennsylvania and chairman of the climate change task force that drafted the survey, that they will abandon the regulation.
"One of the goals here is to try to make for a coordinated national response instead of overlapping requests from different states," Ario said in an interview. "That still remains an important goal, but it does get more complicated if particular states don't [participate]."
Questions about state sovereignty arise
The rumblings among undecided states have not yet sparked a crisis. But the unanticipated opposition is growing as Ario and other supporters are trying to close ranks around the survey. In a conference call on Friday designed to garner commitments, two states -- Alabama and Utah -- that participated in the construction of the survey by sitting on the 12-state climate change task force refused to sign on. And those are some of the easier targets.
"We're not positive we're going to administer the survey," Charles Angell, an Alabama regulator, announced.
Just one state's absence could complicate the job of capturing all the nation's large insurers under the climate regulation, the first mandatory disclosure rule on corporations.
"That would be concerning," Sean Dilweg, Wisconsin's insurance commissioner and a key architect of the survey, said of uncommitted states. Insurance regulators strongly defend state sovereignty, and one sudden reversal or more could "undermine the NAIC as a whole," he added.
Plans are being laid to prevent that. Ario hopes to capture the Indiana insurance companies by asking other states in which they do business to require the survey answers. There are nine companies in Indiana with at least $500 million in annual premiums -- the amount that triggers the regulation this year. A 10th company will be netted next year when the trigger drops to $300 million in premiums.
That would ensure that nearly all of the nation's biggest insurers are complying with the climate regulation, which supporters say could accelerate the industry's preparedness. But the plan also raises questions about state sovereignty, said Thomas Sullivan, the insurance commissioner for Connecticut.
Big industry players want to comply
"I think it's served this country well that we do recognize state prerogatives," he said in an interview. "So when it comes down to action at a commissioner level, while I appreciate Commissioner Ario's desire to get a fully baked loaf of bread, I don't know that it has to be baked with a heavy hand. That's all I would say about that."
Sullivan hasn't decided whether he'll administer the survey. "I wouldn't put on odds on I would or I wouldn't," he added. "As I say, we haven't even deliberated over it yet."
The survey has long been haunted by allegations of partisanship. As a whole, the industry is moving broadly to answer questions about climate change, prepare for new risks and reap emerging opportunities. Many companies charged ahead on the topic years ago, and nearly 20, by Ario's count, already disclose their climate activities voluntarily.
Swiss Re, for example, plans to comply with the climate regulation even though the state that it's domiciled in, Indiana, won't administer the survey.
Still, some regulators and industry professionals wonder if the survey will be used as a grappling hook to raise the level of political legitimacy around climate change. Are insurers being forced to provide credibility and perhaps even capital investment to the "green" agenda? skeptical insiders wonder.
A small number of critics have expressed concern about a series of questions in the survey about insurers' investments. Now a handful of regulators from politically conservative states repeated those concerns in interviews. Most commissioners are appointed by governors. A handful, like Alabama Insurance Commissioner Mike Chaney, are elected.
Fears of lawsuits
"I probably will not enforce the survey," Chaney said in an interview. "It's hard for me to talk about global warming when the temperature has dropped 35 degrees in the last day and we've got a cold front coming through and snow and ice in North Mississippi where the day before yesterday it was 67."
Survey supporters have sought to reassure fidgety insurers that there are no wrong responses. Ario encouraged industry officials last week to provide straightforward answers, even in the case of little or no climate action. He suggested there would be no detrimental fallout.
The concerns should disappear after insurers submit their first answers, said Andrew Logan, who oversees finance and climate issues with Ceres, a group of institutional investors and environmentalists that helped design the survey.
"I don't fully understand what the fears are to be honest," Logan said. "I have never seen the harm in greater transparency and greater disclosure. I think we'll see those fears proven to be groundless once we get the results coming out."
Others aren't so sure. The answers will be online for everyone to see, perhaps providing ammunition for victims of climatic cataclysms who file lawsuits against insurers for insufficient protection against global warming.
That's how Richardson, the regulator in South Carolina, sees it. "I don't want this to turn into the Trial Lawyers Full Employment Act."
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