A Look at ESG, Climate Change and US Insurers at Mid-2023

Decarbonization Journeys or Ideological Joyrides? A Look at ESG, Climate Change and US Insurers at Mid-2023



With most state legislatures now finished with their 2023 sessions and with the East and West coasts preparing for peak hurricane and wildfire season, respectively, now is a good time to take stock of the environmental, social and governance (ESG) debates currently taking place in the United States, as well as the overall climate change regulatory environment for US insurers. It has been an extraordinary year thus far and will likely continue to be interesting with the upcoming 2024 presidential election.

Reports from the mainstream press and in industry publications regarding ESG developments and insurers are often event by event, development by development and colored by extreme weather conditions and significant industry events, whether related to underwriting “suspensions” in certain states or to the viability of the Net-Zero Insurance Alliance. However, it’s difficult to find reports that give readers a sense of the various “forces at work” in this area. This article is an attempt to do just that while painting a picture for insurers as to what the near future might look like as they attempt to chart a course between the opposing ESG camps in the United States. Let’s start with the federal developments.

In Depth


Assuming US President Joe Biden is the Democratic Party’s presidential nominee next year, it seems unlikely that his stance on ESG will differ from the whole-of-government approach he announced early on in his presidency. It is expected that the US Securities and Exchange Commission will continue to press ahead with its proposed climate change risk disclosure regulation (which is reportedly slated for an October 2023 release), federal banking regulators will continue moving in the direction of requiring regulated entities to include climate change risk in lending and investment decisions, the US Department of Labor will continue to defend its position that pension trustees consider ESG factors when making investment decisions and the Federal Insurance Office (FIO) will continue to develop its approach to climate risk regulation. FIO Director Steven Seitz recently confirmed during a Federal Advisory Committee on Insurance meeting that the FIO still plans to require certain US insurers to respond to a data call on homeowners’ insurance in an effort to better understand the country’s exposure to climate risk disruptions. Despite criticism from industry and state regulators, given recent well-publicized underwriting “suspensions” in catastrophe-exposed states by leading property insurers, it seems all but certain that the FIO will press ahead with its data call. It will be quite interesting to read the FIO’s analysis of state insurance regulators’ progress with respect to climate change regulation in a report that’s due “later this summer.”

On the Republican side, there is a growing list of candidates whose views on ESG range from skeptical to negative. If a candidate with a negative outlook on ESG is elected the next president, we can expect (at a minimum) a repeat of the country’s 2017 exit from the Paris Climate Agreement and yet another about-face by federal agencies with respect to the promulgation of ESG principles and guidelines, climate risk disclosure requirements, etc. Incidentally, the reference to “ideological joyrides” in the title of this piece is lifted from remarks Governor Ron DeSantis (R-FL) made last month when signing anti-ESG legislation into law. However, there are some Republican candidates who do believe that climate change is real and that human activity has had something to do with it. Beyond that, the candidates differ only in the vehemence of their opposition to the pro-ESG positions of Democrats and to anti-business policy solutions, such as reducing greenhouse gas emissions (e.g., recently announced presidential candidate Governor Doug Burgum (R-ND), while setting a goal to have North Dakota be carbon neutral by 2030, stated that he would prefer to have the state achieve that goal by capturing massive amounts of carbon in the state’s geology and agricultural industry.)

12-Month Outlook: Escalating anti-ESG rhetoric is expected leading up to the 2024 presidential election. If federal agencies publish proposed pro-ESG climate change risk disclosure and/or related regulatory requirements, expect immediate court challenges by anti-ESG activists around the United States who cite to the Supreme Court of the United States’ 2022 “major question” decision in West Virginia v. Environmental Protection Agency.


In recent days, there have been reports of a new US Senate “investigation” of underwriting decisions made by US insurers vis-à-vis energy companies and fossil fuel projects. This investigation, which will presumably feature hearings and testimonies from insurance industry executives, can be classified as the Democratic party’s contribution to ESG political theater in the run-up to the 2024 elections.

Republicans in the House of Representatives are expected to continue to present their anti-ESG views, centering (presumably) on the extensive state-based anti-ESG activity—investigatory, legislative and litigation—that we have been seeing for the past year.

12-Month Outlook: Expect more congressional hearings in both the House and Senate, with the Republican-controlled House possibly considering and passing anti-ESG legislation focused on federally regulated banks and investment managers. If such legislation is adopted by the House, it will likely not progress in the Democratic-controlled Senate.


Legislative Activity during the 2023 Sessions

This year, at least 20 “red” states considered adopting anti-ESG legislation or some sort of “resolution” opposing ESG principles. Of the states that enacted anti-ESG legislation, most were couched either in terms of “anti-boycott” measures that would prohibit states or municipalities from hiring commercial actors (banks and investment managers) that boycotted or discriminated against fossil fuel companies (e.g., Texas and North Dakota), gun manufacturers (e.g., Alabama) and/or agricultural industry participants (e.g., North Dakota) or in terms of prohibiting state actors from considering “social credit, environmental, social, governance or similar values-based or impact criteria” when making procurement or investment decisions with respect to state pension funds. In simpler terms, mandating that investment decisions consider only “pecuniary” factors.

It’s unclear what state legislative (or other) activity the anti-ESG camp has up its sleeves for 2024, but states that did not enact anti-ESG legislation may try and make it happen still. There could also be attempts to enact laws that prohibit suing energy companies for climate change-related adaptation costs, as several states and municipalities have done (see below for more on the climate change litigation scene).

But what about insurers specifically? The only known state to enact legislation that would impose ESG-related changes in the way insurers operate is Texas. Senate Bill (SB) 833/House Bill (HB) 1239, which is still awaiting sign-off from Governor Greg Abbott, forbids admitted insurers from using “an environmental, social or governance model, score, factor, or standard” in developing rates for similarly situated insurance buyers. The legislation contains a broad exception that protects insurers whose rating decisions “are based on an ordinary insurance business purpose, including the use of sound actuarial principles, or financial solvency considerations reasonably related to loss experience for the different types of risks and coverages made available….” Despite insurance industry opposition to the feared “balkanization” of the national marketplace, it is expected that more states will consider similar legislation next year.


Keep in mind that some states are very much pro-ESG. For example, California legislators recently moved three pro-ESG bills forward:

  • SB 261: If the California State Assembly and Governor Gavin Newsom agree, the California Air Resources Board would be required to annually assess and report on the climate risks facing the state and summarize the various climate financial risk disclosures that certain large commercial enterprises would be required to file annually per SB 253, among other requirements.
  • SB 253: If passed, the Climate Corporate Accountability Act would require certain large businesses to disclose greenhouse gas emissions reports.
  • Assembly Bill (AB) 970: If passed by the state Senate and approved by Governor Newsom, this bill would require the California Department of Insurance to develop the Climate and Sustainability Insurance and Risk Reduction Program, which would expand insurance options, particularly for vulnerable and disadvantaged communities.

In New York, searching legislation databases using the term “climate risk” produces more than 50 pro-ESG results for the 2023 session that just adjourned on June 10.

In May 2023, Colorado enacted SB 16, making it the 17th state to require domestic insurers that write more than $100 million in premiums annually to submit annual climate financial risk disclosure reports using the National Association of Insurance Commissioners’ (NAIC) revised Task Force for Climate-Related Financial Disclosure (TCFD)-aligned template reporting form.

12-Month Outlook: Expect (many) more anti- and pro-ESG legislative proposals during the 2024 state legislative sessions.


As we have reported for the past two years, the NAIC has publicized (and continues to publicize) its efforts with respect to climate change. Tangible accomplishments apart from the updated climate change risk disclosure survey template are harder to spot. This year, Colorado and Illinois joined the 15 states that already require larger “domestic” insurers (“domestic” meaning chartered in a state that is primarily responsible for solvency regulation of those insurers) to file NAIC climate risk disclosure surveys (or use the current TCFD template) annually. While 2022 surveys are still not yet available for review, affected insurers are required to file their 2023 surveys or reports by the end of August.

Having said this, it is unclear whether and to what extent state regulators are using their financial or solvency examination powers to require insurers to include climate risk disclosures in annual enterprise risk or Own Risk and Solvency Assessment disclosure filings. New York is the only state that has a comprehensive climate risk regulatory framework in place and the New York State Department of Financial Services, like many state regulatory agencies, is experiencing difficulties hiring and retaining experienced personnel, including personnel with the skill sets needed to analyze the adequacy of climate risk disclosures and track insurers’ adherence to their stated decarbonization targets. The NAIC’s Climate and Resiliency Task Force has made multiple climate risk and solvency analysis referrals to other NAIC committees focused on financial solvency matters but there has yet to be any responses. We may see some activity with respect to the development and use of climate risk scenario analyses and/or edits to the NAIC’s Financial Examiners Handbook later in the year.

12-Month Outlook: Continued NAIC inaction is the most likely result due to the ongoing blue vs. red state divide with respect to climate change and ESG. However, if the FIO’s late summer report on the NAIC’s climate change regulatory progress is highly critical of state regulatory oversight, we could see some NAIC activity, possibly including “model” loss prevention and mitigation legislation and/or product development (e.g., parametric coverages) in an effort to reduce coverage gaps. Tangible progress on the development of climate-related solvency analysis and monitoring tools or protocols is less likely but still possible.


For years, suits brought against fossil fuel energy giants by states and municipalities seeking damages to cover the cost of, among other things, fortifying low-lying areas against rising sea levels and coping with increased rainfall amounts because of more frequent and more intense storms have been stalled in procedural wrangling. The key question is whether the cases should be litigated in federal courts or in state courts. Earlier this spring, the Supreme Court determined it should be state courts.

While more preliminary litigation sparring is likely, there are roughly 25 suits currently in state courts—from Hawaii to New Jersey—that could soon proceed with discovery practice (document production requests, depositions, etc.) to determine what energy companies knew about global warming caused by their products and processes, when they knew about it and what they decided to disclose to the public. One insurer CEO characterized these cases as a “wave” of climate change-related litigation that could pose problems for the insurance industry, particularly for insurers with a history of having underwritten “old” policies for companies that are most responsible for greenhouse gas emissions going back many decades.

Finally, keep an eye on the outcome of Held v. Montana, a suit brought by several local youths claiming that the state is failing to provide its citizens with a “clean and healthful environment” as guaranteed by the state’s constitution. The trial is ongoing in Helena, Montana.

12-Month Outlook: Expect more suits by states and municipalities seeking damages for costs to adapt to warmer, wetter and stormier climate conditions. And perhaps an upsurge of suits alleging corporate greenwashing should federal and state regulators become significantly more active in policing sustainability or decarbonization claims.