NAIC president: NOAA data loss may prompt insurers to seek rate hikes

The termination of a catastrophe-related database managed by the National Oceanic Atmospheric Administration could wind up costing US property owners.

To the dismay of the insurance and agriculture industries, NOAA announced May 8 that it is retiring its Billion Dollar Weather and Climate Disasters product and will not update the database beyond calendar year 2024.

The importance of NOAA data "cannot be undersold," according to National Association of Insurance Commissioners President Jon Godfread, as insurers rely on it as a "reliable source" for risk modeling.

"If you get into a situation where you've got to rework your models of how you do ratemaking and how you do analysis that creates some uncertainty," said Godfread, who is also North Dakota's insurance commissioner, in an interview. "That uncertainty only seeks to drive rates up."

Concerns from coast to coast

Top regulators from across the country are united in their worry that insurers and policyholders will suffer major consequences from NOAA's decision to halt the collection and publication of certain disaster-related datasets.

Oklahoma Insurance Commissioner Glen Mulready echoed Godfread's concerns about an important database used for risk modeling no longer being available to insurers.

"The thing about that is, from a premium standpoint, without data there's an unknown, and companies are going to build that in their price," Mulready said. "That's not good."

Members of Congress are also troubled by NOAA's decision. Sen. Richard Blumenthal (D-Connecticut) told S&P Global Market Intelligence that the cuts are "absolutely unfathomable in their disruptive impact" and called for bipartisan support to restore funding.

"[NOAA]'s work is absolutely necessary, it's not a luxury or convenience," Blumenthal said in an interview. "It's necessary for people to know when weather disasters are going to strike, and the insurance industry should unite with us in demanding the administration pull back these cuts."

Blumenthal does not see any alternate resources that could provide the type of data that NOAA offers.

Shuttering the climate disaster database is part of wide-ranging cuts to numerous government agencies involved in activities related to natural catastrophes and climate change. The Trump administration is shrinking federal disaster spending and shifting more of that burden to state emergency managers by downsizing the Federal Emergency Management Agency (FEMA).

Petitions

Numerous groups and agencies have written letters to NOAA and legislators, asking that the agency continue to update the major disaster database.

"The loss of this data will stifle research and progress on mitigation efforts, which are used to prevent or limit losses to property while keeping individuals and communities safe," the American Academy of Actuaries said in a June 5 letter. "Furthermore, this data loss will likely make catastrophe modeling and effective insurance pricing more difficult, at the risk of exacerbating the problem of insurance affordability and availability that is already seen in some parts of the country."

Several major insurance companies, including The Allstate Corp., The Travelers Cos. Inc. and State Farm Mutual Automobile Insurance Co., have reduced coverage to states like California that have been hit frequently by major natural disasters with big claims bills.

The Academy also noted that FEMA's National Risk Index relies on the NOAA dataset. If NOAA moves forward with its plans to retire the database, the FEMA index will either deteriorate or be discontinued, the actuary organization said.

For its part, the NAIC penned a May 2 letter to Commerce Secretary Howard Lutnick, as well as leaders of the House Committee on Energy and Commerce and the Senate Committee on Commerce, Science and Transportation, indicating that state regulators have heard grave concern from the industry.

Godfread said the NAIC's message was heard "loud and clear." A number of other stakeholders, including farmers and ranchers, have made their voices heard as well, causing pressure to mount on NOAA from multiple angles.

"I think our message has been received," Godfread said. "Now, if they're going to do anything with it, that remains to be seen, but I think we've done what we can do and pushed where we can push."

Overall, Godfread is puzzled by NOAA's decision to retire the dataset, but remains optimistic that the move will be reversed.

"I'm having a hard time connecting the dots and the thinking on this one," he said. "But I'm hopeful that as we continue down the road, calmer heads will prevail, and we'll get back to business as usual with NOAA because it's an absolutely critical portion of the insurance industry."