Notice2023-24248
Agency Information Collection Activities; Submission for OMB Review; Comment Request; Federal Insurance Office Climate-Related Financial Risk Data Collection for U.S. Homeowners Multi-Peril Underwriting Data
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Published
November 2, 2023
Issuing agencies
Treasury Department
Abstract
Pursuant to the Federal Insurance Office Act of 2010 (FIO Act), the Federal Insurance Office (FIO) of the U.S. Department of the Treasury will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995 (PRA), on or after the date of publication of this notice. This data collection will assist FIO's assessment of the potential for any major disruptions of private insurance coverage in regions of the country particularly vulnerable to climate change impacts. The public is invited to submit comments on this request.
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<title>Federal Register, Volume 88 Issue 211 (Thursday, November 2, 2023)</title>
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[Federal Register Volume 88, Number 211 (Thursday, November 2, 2023)]
[Notices]
[Pages 75380-75386]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24248]
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DEPARTMENT OF THE TREASURY
Agency Information Collection Activities; Submission for OMB
Review; Comment Request; Federal Insurance Office Climate-Related
Financial Risk Data Collection for U.S. Homeowners Multi-Peril
Underwriting Data
AGENCY: Federal Insurance Office, Departmental Offices, Department of
the Treasury.
ACTION: Notice of information collection; request for comment.
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SUMMARY: Pursuant to the Federal Insurance Office Act of 2010 (FIO
Act), the Federal Insurance Office (FIO) of the U.S. Department of the
Treasury will submit the following information collection request to
the Office of Management and Budget (OMB) for review and clearance in
accordance with the Paperwork Reduction Act of 1995 (PRA), on or after
the date of publication of this notice. This data collection will
assist FIO's assessment of the potential for any major disruptions of
private insurance coverage in regions of the country particularly
vulnerable to climate change impacts. The public is invited to submit
comments on this request.
DATES: Comments must be received by December 4, 2023 to be assured of
consideration.
ADDRESSES: Written comments and recommendations for the proposed
information collection should be submitted at <a href="https://www.reginfo.gov/public/do/PRAMain">https://www.reginfo.gov/public/do/PRAMain</a>. Find this information collection by selecting
``Currently under 30-day Review--Open for Public Comments'' or by using
the search function.
FOR FURTHER INFORMATION CONTACT: Copies of the submissions may be
obtained from Elizabeth Brown, Senior Insurance Regulatory Policy
Analyst, by emailing <a href="/cdn-cgi/l/email-protection#df9ab3b6a5bebdbaabb7f19dadb0a8b19fabadbabeacaaada6f1b8b0a9"><span class="__cf_email__" data-cfemail="02476e6b78636067766a2c40706d756c42767067637177707b2c656d74">[email protected]</span></a>, calling (202) 597-
2869, or viewing the entire information collection request at
<a href="http://www.reginfo.gov">www.reginfo.gov</a>.
SUPPLEMENTARY INFORMATION:
Title: Federal Insurance Office Climate-Related Financial Risk Data
Collection for U.S. Homeowners Multi-Peril Underwriting Data.
OMB Control Number: 1505-NEW.
Type of Review: Request for a new OMB Control Number.
Description: On May 20, 2021, President Biden issued the Executive
Order on Climate-Related Financial Risk, Exec. Order No. 14030 (E.O.
14030), which called on FIO to: (1) ``assess climate-related issues or
gaps in the supervision and regulation of insurers'' and (2) ``further
assess, in consultation with States, the potential for major
disruptions of private insurance coverage in regions of the country
particularly vulnerable to climate change impacts.'' \1\ This
information collection is necessary for FIO to advance its statutory
mandates (including to monitor the extent to which traditionally
underserved communities and consumers, minorities, and low- and
moderate-income persons have access to affordable insurance products,
and to monitor all aspects of the insurance industry) and to fulfill
the second undertaking for FIO under E.O. 14030.\2\
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\1\ Executive Order on Climate-Related Financial Risk, Exec.
Order No. 14030, 86 FR 27,967 (May 20, 2021) (E.O. 14030).
\2\ 31 U.S.C. 313(c); E.O. 14030. FIO addressed the first
undertaking for FIO under E.O. 14030 with the publication of its
report Insurance Supervision and Regulation of Climate-Related Risks
(June 2023), <a href="https://home.treasury.gov/system/files/311/FIO-June-2023-Insurance-Supervision-and-Regulation-of-Climate-Related-Risks.pdf">https://home.treasury.gov/system/files/311/FIO-June-2023-Insurance-Supervision-and-Regulation-of-Climate-Related-Risks.pdf</a>.
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Under FIO's data collection, FIO will obtain consistent, granular,
and comparable homeowners insurance data that is not otherwise publicly
available on a nationwide level. This nationwide view is critical to
understanding how climate-related financial risks impact families and
individuals across state markets and the United States, and how these
effects could impact the broader financial system.
FIO Authorities
Under the FIO Act, FIO's authorities include monitoring all aspects
of the insurance sector, including identifying issues or gaps in the
regulation of insurers that could contribute to a systemic crisis in
the insurance sector or the U.S. financial system; monitoring the
extent to which traditionally underserved communities and consumers,
minorities, and low- and moderate-income persons have access to
affordable insurance products; collecting data and information on and
from the insurance industry and insurers; analyzing and disseminating
data and information; and issuing reports regarding all lines of
insurance that FIO monitors.\3\ Each of these authorities is relevant
to FIO's planned data collection.
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\3\ 31 U.S.C. 313-314.
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Efforts To Collect Data From Other Sources
Before FIO seeks to collect data directly from insurers, the FIO
Act requires FIO to coordinate with relevant insurance regulators in
the 50 states, the District of Columbia, and the five U.S. territories
(collectively, the State Insurance Regulators), relevant federal
agencies, and any publicly available sources in accordance with
procedures set forth in the FIO Act before FIO collects the data
directly from insurers.\4\ Prior to publishing FIO's October 2022
notice and request for comment related to the proposed data collection
(October 2022 FRN), FIO coordinated with State Insurance Regulators to
determine if they could provide in a timely manner the data that FIO
proposed collecting.\5\ Following those efforts, as described in detail
in the October 2022 FRN, FIO determined that the data that FIO was
proposing to collect was not available or could not be obtained in a
timely manner from any of the State Insurance Regulators, relevant
federal agencies, or publicly available sources.\6\
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\4\ 31 U.S.C. 313(e)(4) provides that ``Before collecting any
data or information under paragraph (2) from an insurer, or
affiliate of an insurer, the Office shall coordinate with each
relevant Federal agency and State insurance regulator (or other
relevant Federal or State regulatory agency, if any, in the case of
an affiliate of an insurer) and any publicly available sources to
determine if the information to be collected is available from, and
may be obtained in a timely manner by, such Federal agency or State
insurance regulator, individually or collectively, other regulatory
agency, or publicly available sources. If the Director determines
that such data or information is available, and may be obtained in a
timely manner, from such an agency, regulator, regulatory agency, or
source, the Director shall obtain the data or information from such
agency, regulator, regulatory agency, or source. If the Director
determines that such data or information is not so available, the
Director may collect such data or information from an insurer (or
affiliate) only if the Director complies with the requirements of
subchapter I of chapter 35 of title 44, United States Code (relating
to Federal information policy; commonly known as the Paperwork
Reduction Act), in collecting such data or information.
Notwithstanding any other provision of law, each such relevant
Federal agency and State insurance regulator or other Federal or
State regulatory agency is authorized to provide to the Office such
data or information.''
\5\ Agency Information Collection Activities; Proposed
Collection, Comment Request; Federal Insurance Office Climate-
Related Financial Risk Data Collection, 87 FR 64,134 (October 21,
2022) (October 2022 FRN).
\6\ October 2022 FRN, 87 FR at 64,140.
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After the end of the comment period for the October 2022 FRN, FIO
had additional meetings with the NAIC and the State Insurance
Regulators to offer increased coordination and collaboration between
FIO's proposed data collection and any efforts of the NAIC and State
Insurance Regulators. On August 15, 2023, the NAIC
[[Page 75381]]
announced a plan to issue a data call to assist State Insurance
Regulators to collect data from insurers to better understand property
markets and coverages and protection gaps, citing the ``increasing
frequency and severity of weather events, rising reinsurance costs, and
inflationary pressures'' that were creating insurance availability and
affordability issues.\7\ FIO supports continued coordination and
collaboration efforts that would enable it to fulfill its statutory
mission while minimizing any burdens on insurers, to the extent
feasible. It is unclear when the NAIC data call may be implemented and
whether all State Insurance Regulators will participate in any proposed
NAIC data call. FIO will continue to engage with the NAIC and monitor
its development of a homeowners insurance data collection template and
the use of that template or similar templates by State Insurance
Regulators.
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\7\ NAIC, ``NAIC to Issue Data Call to Help Regulators Better
Understand Property Markets,'' news release, August 15, 2023,
<a href="https://content.naic.org/article/naic-issue-data-call-help-regulators-better-understand-property-markets">https://content.naic.org/article/naic-issue-data-call-help-regulators-better-understand-property-markets</a>.
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In sum, FIO has determined that the nationwide ZIP Code level data
that it seeks to collect is not available or may not be obtained in a
timely manner and has therefore determined to use its data-collection
authorities under the FIO Act to obtain the necessary data directly
from certain insurance groups.\8\
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\8\ 31 U.S.C. 313(e).
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Importance of Data Collection
The proposed data collection would provide FIO with a nationwide
view of homeowners insurance that is critical to understanding how
climate-related financial risks impact families and individuals across
the United States and how these effects could impact the broader
financial system. Since the publication of the October 2022 FRN,
multiple homeowners insurers have announced decisions to exit certain
areas or to decline to renew certain policies.\9\ As Treasury stated in
a recent report: ``Some evidence shows that states with exposure to
climate hazards are already experiencing higher insurance costs, and
the availability of insurance could have differential impacts for
mortgage availability.'' \10\ Price increases often disproportionately
impact traditionally underserved and disadvantaged communities and
consumers, including those who are low- and moderate-income.\11\ Price
increases could make insurance unavailable for such groups because they
may be priced out of the market. A recent survey showed that about half
of U.S. homeowners who did not purchase homeowners insurance had
household incomes under $40,000 per year.\12\ FIO's work will
facilitate further research and analysis to better understand the
effects of climate-related risks on housing and the resulting
ramifications for household finances and homeowners.
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\9\ See, e.g., Christopher Flavelle, et al.``Climate Shocks Are
Making Parts of America Uninsurable. It Just Got Worse,''New York
Times May 31, 2023, <a href="https://www.nytimes.com/2023/05/31/climate/climate-change-insurance-wildfires-california.html">https://www.nytimes.com/2023/05/31/climate/climate-change-insurance-wildfires-california.html</a>.
\10\ U.S. Department of the Treasury, The Impact of Climate
Change on American Household Finances (September 2023), 12, <a href="https://home.treasury.gov/system/files/136/Climate_Change_Household_Finances.pdf">https://home.treasury.gov/system/files/136/Climate_Change_Household_Finances.pdf</a>.
\11\ See, e.g., White House Council of Economic Advisors,
Economic Report of the President (March 2023), Box 9-2, 281, <a href="https://whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf">https://whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf</a>; U.S.
Department of the Treasury, The Impact of Climate Change on American
Household Finances, 6.
\12\ Insurance Information Institute, Homeowners Perception of
Weather Risks: 2023 Q2 Consumer Survey (2023), 2, <a href="https://www.iii.org/sites/default/files/docs/pdf/2023_q2_ho_perception_of_weather_risks.pdf">https://www.iii.org/sites/default/files/docs/pdf/2023_q2_ho_perception_of_weather_risks.pdf</a>.
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Purpose of Data Collection
FIO plans to use the information obtained from this data collection
to perform a nationwide analysis to advance its statutory mandates and
to respond to E.O. 14030. FIO will assess the impact of climate-related
risk on the availability and cost of homeowners insurance in the United
States. The primary goal of this data collection is to obtain
consistent, comparable, and granular homeowners insurance data that is
not otherwise publicly available that will enable FIO to assess the
impact that climate-related physical risks have had on the homeowners
insurance market since 2017 at a ZIP Code level. Data of the type FIO
seeks is, at present, generally available only at the national or state
level, with limited data available at a more granular level. Using the
data from this collection, FIO will analyze nationwide trends,
including comparisons of trends in homeowners insurance availability
and costs. This data collection and analysis will benefit a wide
variety of stakeholders, including insurers, reinsurers, homeowners,
mortgage lenders, and policyholders, and inform policymakers by
establishing a framework for granular, consistent, and comparable data
with which to assess the localized impact of climate-related events and
conditions on trends in homeowners insurance availability and cost.
This data will help highlight underwriting trends and help identify
areas where less-available or more-costly insurance is associated with
higher risks from climate-related events. Such information may also
help inform private and public efforts at the federal, state, and local
levels to target pre-disaster mitigation measures and to improve policy
in this area.
The narrower focus of this data collection includes data that will
help establish a national baseline for analytics in this area. There is
also potential value in collecting and analyzing more detailed
information in this area. FIO intends to conduct climate-related data
collections and analyses in the future, with a goal of doing so on an
annual basis. In its initial analysis, FIO will focus on understanding
nationwide trends in underwriting data. In future data collections, FIO
may analyze in more detail, among other things, climate-related impacts
on traditionally underserved communities or consumers, minorities, and/
or low- and moderate-income persons.
FIO will not publish data or analysis of specific companies or
groups or comparisons of results across companies or groups. FIO also
will not publish data on or analysis of the solvency of insurance
companies or groups based on the data collected. When FIO publishes
analyses based on the data it collects, such analyses will be based on
group-level submissions that will be aggregated across insurance groups
to the ZIP Code level.
Data Collection's Key Elements
The October 2022 FRN provided the rationale for the proposed data
collection and its eight key elements: (1) a focus on insurer
underwriting, (2) insurance lines of business, (3) insurers, (4) data
fields, (5) reporting framework, (6) reporting period, (7) geographic
granularity, and (8) geographic scope.
Figure 1 below describes the initial proposed scope as well as
FIO's changes to narrow that scope based in large part on stakeholder
feedback. Among other things, FIO is removing data fields for which
information is substantially similar to other fields, cannot be
collected consistently at this time, or is not necessary for FIO's
initial analysis. FIO believes that the narrower focus of this
collection will improve data consistency and homogeneity and reduce the
burden on the responding insurers.
[[Page 75382]]
Figure 1--Changes to FIO's Data Collection
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Proposed scope in
Key elements October 2022 FRN Summary of changes
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Underwriting Focus.......... Physical risk from No changes.
underwriting by P&C
insurers, excluding
liability risk \13\.
Insurance Lines of Business. Homeowners Multi- Homeowners Multi-
Peril with 6 form Peril with 1 form
types covering type covering Owner
Mobile Homeowners, Occupied Homeowners
Owner Occupied (form type HO-3,
Homeowners, and the most common
Other Homeowners homeowners policy
policy form types. form).
Insurers.................... Nationwide insurers Top nationwide
writing above a homeowners
premium threshold insurance groups
of $100 million in with 1 percent or
2021 homeowners more share of the
insurance direct homeowners
premiums written. insurance market
Additional insurers based on direct
in order to achieve premiums written in
at least an 80 2022, and request
percent market data to be
share threshold in aggregated and
each of 10 states submitted at an
that are insurance group
potentially the level for all
most prone to homeowners
climate-related insurance entities
disasters. identified within
the group. FIO has
identified 14
homeowners
insurance groups
with 240 homeowners
insurance entities
meeting the
selection
criterion.
Data Fields................. 15 data fields 7 data fields
covering (removing 8 data
information fields from
regarding claims, proposed collection
premiums, and for which
losses that information is
correspond to data substantially
fields reported by similar to other
U.S. insurers to fields, cannot be
State Insurance collected
Regulators in consistently at
annual filings, as this time, or is
well as additional not necessary for
policy information the proposed
not collected on initial analysis).
statutory filings.
Revise 1 data field
for clarity (to
collect number of
policies not
renewed or retained
rather than
premiums not
renewed).
Remove exclusion of
non-weather-related
damages from
reporting on claims
and losses.
Reporting Framework......... Accident year Accident year
reporting basis. reporting basis for
loss- and claims-
related data, and
calendar year
reporting basis for
premium-related
data and policy
information. (This
change provides
clarity on
alignment with the
format of statutory
filings).
Reporting Period............ 5 years of 6 years of
underwriting data underwriting data
(2017-2021). (2017-2022).
Geographic Granularity...... ZIP Code level for No changes.
all U.S. ZIP Codes
applicable to in-
scope insurers.
Geographic Scope............ Nationwide.......... No changes.
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\13\ Liability risk is ``a risk where an insured is liable to a
third party as a result of or caused by any act, error, omission
representation or statement by the insured.'' ``Liability Risk
Definition,'' Law Insider, <a href="https://lawinsider.com/dictionary/liability-risk">https://lawinsider.com/dictionary/liability-risk</a>.
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Underwriting Focus and Line of Business
FIO's data collection remains focused on the physical risk from
underwriting by property & casualty insurers. The data collection also
remains focused on the homeowners insurers multi-peril line of
business. However, in large part in response to comments, this data
collection will seek data relating to policies on a single form type
(rather than the six forms proposed in the October 2022 FRN).
Specifically, FIO will focus on owner-occupied homeowners multi-peril
insurance policies issued on form ``HO-3,'' the most common homeowners
insurance policy form in the United States.\14\
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\14\ HO-3 policies comprise 55.5 percent of all homeowners
insurance policies and 78.3 percent of all owner-occupied homeowners
insurance policies. See NAIC, Dwelling Fire, Homeowners Owner-
Occupied, and Homeowners Tenant and Condominimum/Coorperative Unit
Owner's Insurance Report: Data for 2020 (December 2022), 4, <a href="https://naic.soutronglobal.net/Portal/Public/en-GB/DownloadImageFile.ashx?objectID=9803&ownerType=0&ownerId=2006">https://naic.soutronglobal.net/Portal/Public/en-GB/DownloadImageFile.ashx?objectID=9803&ownerType=0&ownerId=2006</a>.
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Insurers
For this initial data collection, FIO plans to collect data from
the top homeowners insurance groups that have 1 percent or more of the
U.S. homeowners insurance market as measured by aggregate homeowners
insurance direct premiums written in 2022. FIO has identified 14
homeowners insurance groups that meet this criterion (the
Representative Sample Insurers). FIO's selection includes one
standalone entity which is not part of a group. FIO's references to
``group'' include this standalone entity. These 14 groups (out of the
195 homeowners insurance groups operating in the United States)
collectively underwrite about 70 percent of the direct homeowners
insurance premiums written in the 50 states, the District of Columbia,
and U.S. territories, based on 2022 financial statements. The
Representative Sample Insurers have 240 homeowners insurance entities
domiciled in 29 states and operating in many other states nationwide.
FIO is taking a representative sample approach for two reasons: (1) FIO
anticipates, for the purposes of its analyses, that the Representative
Sample Insurers collectively have a sufficient market share for
analyzing impacts in the U.S. market, and (2) the focus on the largest
insurance groups will reduce the burden on small insurers.
Data Fields
FIO plans to collect data from the Representative Sample Insurers
using the FIO Climate Data Collection: U.S. Homeowners Multi-Peril Form
2023-1 (Data Collection Form), which is an Excel spreadsheet that FIO
will provide to them.\15\ In the October 2022 FRN, FIO proposed
collecting 15 data fields. Based in large part on the comments that FIO
received, FIO has decided to collect only seven data fields: (1) Number
of Policy In-Force Exposures (on a calendar year basis (CY)); (2) Total
Dollar Value of Coverage for Dwelling, Other Structures, Personal
Property, and Loss of Use (CY); (3) Number of Policies Not Renewed or
Retained (CY); (4) Direct Premiums Written (CY); (5) Total Direct
Losses Paid (on an accident year basis (AY)); (6) Total Direct Incurred
Losses (AY); and (7) Cumulative Number of Claims Closed With Loss
Payment (direct claims on AY). Data from all seven fields is necessary
for FIO to advance its objectives described above.
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\15\ For more details on the data fields, a copy of the Data
Collection Form and the instructions for filling it out can be found
on FIO's webpage, <a href="https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices">https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices</a>.
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The Number of Policy In-Force Exposures field represents the count
of policies that are in effect (i.e., in-force) as of December 31 for
each reporting calendar year, where one policy in-force corresponds to
one home covered in that year. (This field does not include policies
that lapsed or were canceled during the year). The field is necessary
for FIO to calculate several metrics on a per-policy basis to allow for
comparison across ZIP Codes. For example, FIO will calculate the
average
[[Page 75383]]
premiums, claims, losses, and policy non-renewals based on the total
policies in a given ZIP Code; this field will also support calculation
of changes in total policy counts over time.
The Total Dollar Value of Coverage for Dwelling, Other Structures,
Personal Property, and Loss of Use field represents the total estimated
value of insurance coverage for the dwellings or other property covered
by the policies (i.e., the potential exposures) in a ZIP Code, as
recorded at the effective date of the policies or the date of their
most recent renewal. This field is necessary because the premiums
charged for policies will vary with the value of the properties insured
as well as other factors. The dollar value of coverage and various
calculated fields derived from that (e.g., average premium per $1,000
in coverage) are commonly relied upon as metrics for accessing cost of
coverage.\16\ The field will help FIO, among other things, assess the
variation in the amount of financial protection for properties across
ZIP Codes and over time for a given premium, while holding constant
changes in insurance coverage. The field will also enable FIO to
compare losses across ZIP Codes by calculating losses per $1,000 of
insurance coverage.
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\16\ See, e.g., NAIC, Dwelling Fire, Homeowners Owner-Occupied,
and Homeowners Tenant and Condominium/Cooperative Unit Owner's
Insurance Report: Data for 2020 (2022), Table 3, 4, and 5, <a href="https://naic.soutronglobal.net/Portal/Public/en-GB/DownoadImageFile.ashx?objectId=9803&ownerId=2006">https://naic.soutronglobal.net/Portal/Public/en-GB/DownoadImageFile.ashx?objectId=9803&ownerId=2006</a>; Massachusetts
Division of Insurance, Annual Home Insurance Report for Calendar
Year 2020, 11, <a href="https://www.mass.gov/doc/the-2020-massachusetts-market-for-home-insurance/download">https://www.mass.gov/doc/the-2020-massachusetts-market-for-home-insurance/download</a>.
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The Number of Policies Not Renewed or Retained field addresses the
number of policies that are not renewed or retained at any time during
the reporting year, including non-renewals that are either insurer-
initiated or policyholder-initiated. This field is necessary because
understanding the percentage of policies not renewed will help FIO to
assess availability issues. FIO notes that non-renewals alone may not
be an adequate representation of availability issues because policies
could be discontinued by the policyholder for various reasons, such as
homeownership changes or switching to insurers that are not
Representative Sample Insurers.
This field is replacing the field proposed in the October 2022 FRN
that asked for the ``Amount of Direct Premiums Written Renewed or
Retained.'' FIO is making this change because it is a more commonly
reported measure of non-renewals. Some states (e.g., California) and
the NAIC's Market Conduct Annual Statement require insurers to report
the number of policies not renewed or retained. \17\ To the best of
FIO's knowledge, no state currently requires insurers to report
``Amount of Direct Premiums Written Renewed or Retained.'' Also, the
``Number of Policies Not Renewed or Retained'' is a subset of the data
field that asks for the ``Number of Policy in-force Exposures,''
because in order to provide the ``Number of Policy in-force
Exposures,'' an insurer would need to know both (1) the number of
policies that it renewed or retained and (2) the number of policies not
renewed or retained (i.e., the information FIO is requesting).
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\17\ See California Department of Insurance, ``FACT SHEET: Data
on Insurance Non-Renewals and FAIR Plan,'' news release, December
20, 2021, <a href="https://www.insurance.ca.gov/0400-news/0100-press-releases/2021/upload/nr117DataNon-RenewalsandFAIRPlan12202021.pdf">https://www.insurance.ca.gov/0400-news/0100-press-releases/2021/upload/nr117DataNon-RenewalsandFAIRPlan12202021.pdf</a>;
NAIC, Property & Casualty Market Conduct Annual Statement Homeowner
Data Call & Definitions, <a href="https://content.naic.org/sites/default/files/inline-files/industry_mcas_data_call_def_homeowners_2020.pdf">https://content.naic.org/sites/default/files/inline-files/industry_mcas_data_call_def_homeowners_2020.pdf</a>.
While the ``Number of Policies Not Renewed or Retained'' is not an
annual statutory filing field, the NAIC collects statewide
information on ``Number of Company-Initiated non-renewals during the
period,'' ``Number of cancellations for non-pay or non-sufficient
funds,'' and ``Number of cancellations at the insured's request''
from insurers writing homeowners policies as part of its Market
Conduct Annual Statement data call, and these fields collectively
sum to the number of policies not renewed or retained.
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FIO is retaining a data field for non-renewals because many
commenters noted the importance of collecting information on non-
renewals in order to understand where insurers may be pulling back
coverage. Monitoring the number of non-renewals will allow FIO to
understand non-renewal rates as distinct from changes in premiums.
The Direct Premiums Written field is a measure of policyholders'
cost of obtaining coverage, and is necessary because the average
premium per home or per $1,000 of coverage (premiums divided by number
of policies or premiums divided by the amount of coverage) indicates
what homeowners pay for property insurance on a comparable per-unit
basis. That information, in turn, is necessary because changes in
premiums over time and comparisons of average premium per home on a
nationwide basis can provide meaningful insights into insurance costs.
Collecting this data on a calendar year basis will provide FIO with up-
to-date information on pricing trends. Premium data can also support
analysis of the availability of homeowners insurance in ZIP codes.
The Total Direct Losses Paid field is necessary to understand how
loss trends in each ZIP Code affect the availability and cost of
homeowners insurance. Direct losses paid is the amount of money to date
(for each accident year) that has been paid to, or on behalf of,
policyholders, and does not include estimates of losses that have been
incurred but not yet paid. FIO will analyze trends in paid losses
(including on a per claim basis) by ZIP Code. FIO will also use this
field to examine trends by ZIP Code in paid loss ratios (by dividing by
premiums) and claims severity (by dividing by claims closed with loss
payment) to better understand how underwriting metrics may reflect
weather-related events.
The Total Direct Incurred Losses field is necessary because it
provides a comprehensive measure of the value of an insurer's loss
experience in a reporting period by ZIP Code. Unlike losses paid,
incurred losses reflect the total value of losses that an insurer
incurs during a given period, regardless of whether the losses have
been paid out (i.e., it includes reserves), and is used to estimate
total losses for a given year. FIO will analyze trends in incurred
losses (including on a per-claim basis) by ZIP Code. FIO also will use
this field to look at trends by ZIP Code in incurred-loss ratios (by
dividing by premiums) to better understand how underwriting metrics may
reflect weather-related events.
The Cumulative Number of Claims Closed With Loss Payment field is
necessary because the average amount insurers pay for each claim will
provide insight on the impact of an event (or events) in a given area,
helping FIO to identify exposure frequency and severity.\18\ During the
underwriting process, an insurer must gauge the average value it will
pay out per claim.\19\ Historically, the average cost of claims has
been one of the primary factors behind the price increases and the
tightened availability of homeowners insurance.\20\ FIO will be
[[Page 75384]]
evaluating claims frequency and severity on a nationwide basis to see
if they are associated with average premiums growth or a decrease in
the availability of homeowners insurance. This data field will thus
enable FIO to better understand how underwriting metrics may reflect
weather-related events.
---------------------------------------------------------------------------
\18\ LexisNexis Risk Solutions, ``Annual U.S. Home Insurance
Trends Report Confirms Upward Trend in Loss Cost and Severity across
All Perils,'' news release, October 13, 2022, <a href="https://risk.lexisnexis.com/about-us/press-room/press-release/20221013-home-insurance-trends-report">https://risk.lexisnexis.com/about-us/press-room/press-release/20221013-home-insurance-trends-report</a>; Pat Howard & Kara McGinley,'' Homeowners
Insurance Claims Statistics in 2023,'' Policygenius, December 22,
2022, <a href="https://www.policygenius.com/homeowners-insurance/homeowners-insurance-statistics/">https://www.policygenius.com/homeowners-insurance/homeowners-insurance-statistics/</a>.
\19\AM Best, Best's Guide to Understanding the Insurance
Industry (2023), 6, <a href="https://web.ambest.com/information-services/sales-information/best-s-guide-to-understanding-the-insurance-industry">https://web.ambest.com/information-services/sales-information/best-s-guide-to-understanding-the-insurance-industry</a>.
\20\ See Martin Grace & Robert Klein, ``Homeowners Insurance:
``Markets Trends, Issues and Problems,'' SSRN Electronic Journal,
August 2003, <a href="https://www.researchgate.net/publication/228227047_Homeowners_Insurance_Market_Trends_Issues_and_Problems">https://www.researchgate.net/publication/228227047_Homeowners_Insurance_Market_Trends_Issues_and_Problems</a>.
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The seven data fields described above include three data fields not
collected by State Insurance Regulators (the number of policy in-force
exposures; the number of policies not renewed or retained; and the
total dollar value of coverage for dwelling, other structures, personal
property, and loss of use). The seven data fields also include four
fields to collect ZIP Code level information nationwide regarding
premiums, claims, and losses that correspond to four state-level data
fields reported by U.S. insurers to State Insurance Regulators in
annual filings.
Reporting Framework
The Data Collection Form and accompanying instructions now clarify
that Representative Sample Insurers should use accident year reporting
basis for loss- and claims-related data and calendar year reporting
basis for premium-related data and policy information.\21\ This change
to the instructions provides clarity on alignment with the format of
statutory filings; there is no fundamental change.
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\21\ Insurance information may be reported on either a calendar
year or an accident year basis, depending on the type of information
being reported. Accident year reporting monitors loss development of
a claim over time (and typically includes losses when they occur,
not when they are reported). For example, if a hurricane occurs in
2017, then 2017 would be the accident year. Losses and claims
associated with the hurricane could occur in 2017 but could also
develop into subsequent years as policyholders submit claims and
receive payments over time but would be reported for the 2017
accident year. On the other hand, calendar year reporting does not
change or develop over time beyond the calendar year. For example,
premiums based on a 2017 calendar year would include premiums from
January 1 to December 31, 2017.
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Reporting Period
FIO seeks to collect six years of underwriting data, 2017 through
2022 (Reporting Period). This is a one-year expansion over the
Reporting Period proposed in the October 2022 FRN. Expanding the
reporting timeframe by one additional year will allow FIO to capture
more current data, including the impact of recent climate-related
disasters such as Hurricanes Ian and Nicole, and responds to
stakeholder feedback recommending a longer Reporting Period.
Geographic Scope and Granularity
FIO will collect data at a ZIP Code level for all U.S. ZIP Codes in
which the homeowners insurance entities within the Representative
Sample Insurers have written owner-occupied multi-peril homeowners
multi-peril policies corresponding to policy form HO-3 during the
Reporting Period in order to conduct a granular, nationwide assessment
to advance its statutory mandates and respond to the second undertaking
described in E.O. 14030. The October 2022 FRN outlines several reasons
why ZIP Code level data is critical for FIO's analysis, and those
reasons remain valid.\22\
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\22\ See, e.g., October 2022 FRN, 87 FR at 64,138.
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Collection Process
Data will be collected from the Representative Sample Insurers on
the Data Collection Form, which is a revised version of the template
discussed in the October 2022 FRN. A copy of the Data Collection Form
and the instructions for filling it out can be found at <a href="https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices">https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices</a>. Each of the Representative Sample Insurers will be asked to
aggregate and report the nationwide data requested by the Data
Collection Form at a ZIP Code level for all owner-occupied homeowners
multi-peril policies corresponding to policy form HO-3 that the
homeowners insurance entities within its group have written during the
Reporting Period.
Changes in Data Collection Based on Comments and Feedback Received
In response to the October 2022 FRN, FIO received 35 formal written
comments with over 9,400 signatories. Commenters included individuals,
brokers, insurance industry trade associations, State Insurance
Regulators, public interest groups, consumer advocates, climate and
environmental groups, and others. Following the close of the comment
period of the October 2022 FRN, FIO met with a wide range of
stakeholders, including the NAIC and some State Insurance Regulators,
large writers of homeowners multi-peril insurance, and consumer and
environmental groups, regarding the proposed data collection. In
addition, FIO and members of the Federal Advisory Committee on
Insurance (FACI) discussed the proposed data collection during two
public FACI meetings and at meetings of the FACI Climate Subcommittee.
Based on the public comments and stakeholder feedback, FIO has
revised several aspects of its data collection, including the scope of
the forms included in the homeowners insurance multi-peril line of
business, the selection of insurers, the number of data fields, and the
reporting period for the collection. FIO also revised the instructions
for the Data Collection Form to clarify how the data should be
reported, such as indicating that premium-related data and policy
information should be provided on a calendar year basis and requiring
all claims and losses to be reported, not just weather-related claims
and losses. These changes, taken together, should lessen the burden on
the insurers while also enhancing FIO's analyses.
Revised Focus Within Homeowners Line of Business
FIO has revised its data collection to focus only on the owner-
occupied homeowners multi-peril policy form known as HO-3. In response
to the October 2022 FRN, insurers highlighted the difficulty of
collecting consistent, comparable data across multiple policy form
types. Limiting the collection to one form will allow FIO to collect
more consistent, comparable data as compared to the proposal set forth
in the October 2022 FRN, which proposed collecting six homeowners
insurance policy forms.
Revised Data Fields
Based on the comments received and FIO's decision to narrow the
scope of the data collection, FIO removed eight of the fifteen data
fields proposed in the October 2022 FRN. FIO removed fields for which
the information is substantially similar to other fields (e.g., direct
premiums earned), cannot be collected consistently at this time (e.g.,
total dollar amount of insurance deductible), or is not necessary for
FIO's initial analyses (e.g., number of claims reported). The narrower
focus of this data collection includes data that will help establish a
national baseline for analytics in this area.
Revised Insurer Selection
FIO did not receive many comments related to the proposed
methodology for selecting the insurers for the proposed data
collection, although it did receive comments on the overall burden of
the proposed data collection, as well as on the potential use of the
data for entity-specific analyses, and the operational burden of having
groups report their subsidiaries on separate templates. In the October
2022 FRN, FIO's proposed selection criteria for insurers were: (1)
nationwide insurers writing above a premium threshold of $100 million
in
[[Page 75385]]
2021 homeowners insurance premiums; and (2) additional insurers in
order to achieve at least an 80 percent market share threshold in each
of 10 states that are potentially the most prone to climate-related
disasters.
Although FIO did not receive many specific comments on the
selection of insurers, FIO is changing the selection criteria to cover
only the largest homeowners insurance groups, i.e., those with 1
percent or more of the U.S. homeowners market nationwide, resulting in
the selection of the top 14 homeowners insurance groups by direct
premiums written in 2022. FIO has revised the selection criteria in
order to: (1) reduce the burden on smaller insurers; (2) alleviate
concerns that FIO would be conducting entity-specific analyses; and (3)
make the data operationally easier for insurers to report and for FIO
to collect and analyze.
Revised Reporting Period
FIO is increasing the reporting period from the proposed five years
(2017-2021) to six years (2017-2022) because expanding the reporting
timeframe by one additional year will allow FIO to capture the impact
of recent climate-related disasters, including Hurricanes Ian and
Nicole. A number of commenters supported a longer reporting period,
although many of these called for adding multiple additional years. The
overall burden for the Representative Sample Insurers will not
increase, because FIO is removing eight of the fifteen data fields that
it proposed in the October 2022 FRN and focusing on only one policy
form (HO-3), instead of six policy forms.
No Change to Geographic Scope or Granularity
FIO received many comments on the proposal to collect data at the
ZIP Code level, both for and against.\23\ FIO plans to move forward
with ZIP Code level collection. As many commenters noted, state-level
data would be insufficient for FIO's analysis because climate-related
risks and socioeconomic factors vary across geography, and state-level
trends could differ from trends seen on a more granular level. While
FIO understands the potential additional benefits of collecting census
tract level data relative to ZIP Code information, FIO's discussions
with insurers and other stakeholders leads FIO to conclude that ZIP
Code information tends to be collected by insurers as part of the
address in a homeowners policy, while other geographic information,
such as census tracts, may not be collected by insurers. Consequently,
collecting data at a census tract level could increase the burden on
insurers to produce information at that granularity. FIO believes that
ZIP Code collection most appropriately balances the need for granular
data with the responsibility to minimize collection burden.
---------------------------------------------------------------------------
\23\ Commenters that opposed ZIP Code level collection cited,
among other things, the burden to insurers, the potential for
misleading conclusions based on ZIP Code level claims data, and the
possibility of exposing personally identifiable information or
proprietary data in ZIP Codes with few policies. Those in favor of
granular data collection tended to encourage FIO to collect data at
an even finer granularity than ZIP Code, with census tract being the
most common unit proposed. Those that preferred census tracts cited
various rationales, including that they are comparable, have similar
numbers of residents, tend to be internally similar, and align with
census-defined geographies better than ZIP Codes.
---------------------------------------------------------------------------
Revised Instructions
FIO has revised the instructions for the Data Collection Form
relating to the data fields. The proposed template instructions
provided with the October 2022 FRN directed insurers to report data
only for losses and claims for weather-related damages. In discussions
with FIO, however, insurers noted that it can be difficult or
impossible to exclude non-weather-related damage from other loss
estimates, based on how information is stored within insurers' systems.
In addition, information from the Insurance Information Institute shows
that about 90 percent of homeowners insurance losses have been due to
physical damage from wind, hail, water damage, freezing, fire, and
lightning.\24\ Therefore, FIO has modified the instructions for the
Data Collection Form to remove the exclusion of non-weather-related
damages in connection with the reporting of claims and losses.
---------------------------------------------------------------------------
\24\ ``Facts + Statistics: Homeowners and Renters Insurance,''
Insurance Information Institute, <a href="https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance">https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance</a>.
---------------------------------------------------------------------------
Revised Burden Estimate
FIO received many comments, including in follow-up stakeholder
engagements, regarding its burden estimates, including the number of
hours estimated (hour burden) and average salary used (hourly rate).
Multiple comments stated that the hour burden estimate was too low and
that the hourly rate should be higher to reflect the need for subject
matter experts in actuarial and finance roles to respond to the
collection. Other commenters supported FIO's estimate and emphasized
that the importance of the information collected outweighed the burden.
FIO has revised its estimate of the hour burden to reflect that the
data will be collected for: (1) only seven data fields, not the 15 data
fields originally proposed; (2) only one policy form of homeowners
insurance, not six as originally proposed; (3) one additional year,
2022, beyond the original proposed five years (2017-2021); and (4) the
change in insurer selection criteria.\25\
---------------------------------------------------------------------------
\25\ The Representative Sample Insurers encompass 240 homeowners
insurance entities, which is more than the 213 entities that would
have been covered under the selection criteria outlined in the
October 2022 FRN. Any increase in burden from including more
entities will be offset for two reasons. First, FIO is requesting
that the 14 Representative Sample Insurers aggregate responses
across all of their insurance entities, which should reduce the
burden on any given entity and allow the groups to submit one
consolidated response. Second, FIO is reducing the number of data
fields and number of policy forms for which data should be
collected, which will enable reduction of burden relative to the
proposed estimate, even with the proposed change to add one more
year of reporting.
---------------------------------------------------------------------------
FIO updated the estimated hourly rate to reflect the salary and
benefit increases between June 2022 and July 2023 reported by the U.S.
Bureau of Labor Statistics. FIO has not, however, made any other
adjustments to the hourly rate because the FIO data collection is
largely an operational task focused on data already collected by
insurers.
FIO estimates the annual burden for its data collection is between
14,400 and 48,000 hours at a total cost of $839,520 to $2,798,400 for
the Representative Sample Insurers, collectively.\26\ For reference,
the Representative Sample Insurers reported aggregate revenues of over
$372 billion in 2022.\27\ FIO's revisions to its data collection have
lowered the burden estimate by about 30 per as compared to the
estimates in
[[Page 75386]]
the October 2022 FRN (Figure 2). In addition, the Representative Sample
Insurers are the 14 largest homeowners insurance groups and, as a
result, they may experience internal synergies and efficiencies when
completing the Data Collection Form. Thus, the total number of hours
that it may take all Representative Sample Insurers to collect,
process, and complete the Data Collection Form may be less than the
number of hours that FIO has estimated here.
---------------------------------------------------------------------------
\26\ FIO estimates that each individual homeowners insurance
entity within a Representative Sample Insurer will take between 60
and 200 hours total to collect the requested data for six years
(2017 to 2022). The 14 Representative Sample Insurers have 240
homeowners insurance entities (with the number of entities per group
ranging from 1 to 44, so the burden for each Representative Sample
Insurer would vary). The overall estimated burden hours are 14,400
(240 entities x 60 hours) to 48,000 (240 entities x 200 hours). The
average fully loaded hourly rate for insurance employees in July
2023 was $58.30. Based on data from ``Insurance Carriers and Related
Activities: NAICS 524,'' U.S. Bureau of Labor Statistics, <a href="https://www.bls.gov/iag/tgs/iag524.htm">https://www.bls.gov/iag/tgs/iag524.htm</a>, the average wage rate for all
insurance employees was $43.31 in July 2023, and the total benefit
compensation in the 2nd Quarter of 2023 was 34.6 percent, which is a
benefit multiplier of 1.346. Therefore, a fully-loaded wage rate for
insurance employees is $58.30, or $43.31 x 1.346. Thus, the total
cost for all Representative Sample Insurers to comply with the data
collection would be between approximately $839,520 (14,400 hours x
$58.30/hour) and $2,798,400 (48,000 hours x $58.30/hour).
\27\ Data on revenues for the 13 groups was derived from S&P
Global Market Intelligence (S&P Global) on October 18, 2023. Data
for the revenue of the standalone entity came from its annual
statement for 2022.
Figure 2--Comparison of Burden Estimates
------------------------------------------------------------------------
October 2022 Current
FRN estimates
------------------------------------------------------------------------
Hours per homeowners insurance entity... 100 to 350 60 to 200
Total hours for all Representative 21,300 to 14,400 to
Sample Insurers........................ 74,550 48,000
Hourly rate............................. $54.27 $58.30
Total cost for all Representative Sample $1,155,951 to $839,520 to
Insurers............................... $4,045,829 $2,798,400
------------------------------------------------------------------------
Analysis of Data Collected
FIO currently plans to analyze the data collected using trend or
time-series analysis. In the time-series analysis, FIO will assess
trends in underwriting, claims, and loss metrics, normalized on a per-
policy, premium, or coverage basis to allow for comparison across ZIP
Codes, for owner-occupied homeowners multi-peril (HO-3 form) policies
over the last six years. In addition to the data collected on the Data
Collection Forms, FIO's analysis will rely on several types of data
that may include, but are not limited to, publicly available insurance
information such as residual market information, information on the
relative risks that locations face from climate-related events, and
data used to control for other changes in a ZIP Code that could
influence insurance markets (e.g., inflation, real estate values, or
changes in population). At a later stage, FIO may consider using
additional methodologies, including multivariate statistical analysis.
Submission of Data
Reporting under this data collection would be mandatory for all
Representative Sample Insurers. If OMB approves this data collection,
the Representative Sample Insurers will be expected to submit the
completed Data Collection Form through a secure Treasury web portal
within 90 days of FIO publishing a Federal Register notice announcing
the start of the data collection. (FIO has extended the time period
which the Representative Sample Insurers will have to submit the
information from 60 days to 90 days to ensure that they have sufficient
time to gather and provide the requested data.)
FIO intends to provide training and additional resources within the
data collection period to facilitate the proper completion of reporting
templates.
Given the potential sensitivity of some of the requested data, FIO
will seek to maintain the data submitted in a confidential manner. The
FIO Act includes provisions addressing the privacy or confidentiality
of submissions of non-publicly available data and information to
FIO.\28\ In accordance with the FIO Act, submissions pursuant to this
data collection will not constitute a waiver of, or otherwise affect,
any privilege arising under federal or state law to which the data or
information is otherwise subject.\29\ FIO expects that data it receives
under this collection will likely contain or consist of ``trade secrets
and commercial or financial information obtained from a person and
privileged or confidential.'' This type of information is subject to
withholding under exemption 4 of the Freedom of Information Act.\30\
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\28\ 31 U.S.C. 313(e)(5).
\29\ 31 U.S.C. 313(e)(5)(A).
\30\ 5 U.S.C. 552(b)(4).
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All data collection is expected to be completed through a secure
portal maintained by Treasury, and FIO will not publish confidential
firm-specific data from individual submissions. FIO may publish
aggregated analyses of the submitted information.
Form: FIO Climate Data Collection: U.S. Homeowners Multi-Peril Form
2023-01.
Affected Public: Businesses and other for-profit institutions and
not-for-profit entities.
Estimated Number of Respondents: 14.
Frequency of Response: On occasion, although FIO aims to conduct
annual data collections.
Estimated Total Number of Annual Responses: 14.
Estimated Time per Response: Varies from 60 hours to 8,800 hours
depending upon the number of homeowners insurance entities within a
respondent group. The estimated total annual burden hours are 60 to 200
hours per homeowners insurance entity within a respondent group. The
number of homeowners insurance entities within a respondent group
varies from 1 to 44, with the average number being 17. Thus, the
average estimated time per response ranges from 1,020 hours to 3,420
hours.
Estimated Total Annual Burden Hours: Approximately 14,400 to 48,000
hours total for all respondents together. The estimated total annual
number of burden hours for each respondent will be based on the number
of homeowners insurance entities within each respondent group. The
estimated total annual burden hours are 60 to 200 hours per homeowners
insurance entity within a respondent group.
Authority: 44 U.S.C. 3501 et seq.
Spencer W. Clark,
Treasury PRA Clearance Officer.
[FR Doc. 2023-24248 Filed 11-1-23; 8:45 am]
BILLING CODE 4810-AK-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.