Utica National Insurance Group & Climate Risk
At Utica National, we take Climate Risk seriously.
At Utica National, we take Climate Risk seriously.
Board Oversight & Governance
The member companies of the Utica National Insurance Group are fully compliant with the NYS DFS Guidance for Domestic Insurers on Managing the Financial Risks from Climate Change and have adopted a multipronged approach regarding the Board’s oversight and Management’s approach to Climate Related Risk and related Opportunities. A Board Committee approves the Company’s risk tolerances and the Company’s compliance therewith, reviews the Company’s Own Risk Solvency Assessment (ORSA), receives reports and director education regarding Climate Risk, weather and nonweather-related exposures, Catastrophe (CAT) modeling and return period loss estimates, etc. In addition to a Board-level Committee that oversees management with respect to climate risk, the Company has a cross-functional management committee responsible for the various elements relating to the management of Climate Risk, made up of C-Suite members, as well as additional members of their teams to supplement the operation of the Committee, and the roles and responsibilities of each member of the Committee are clearly defined and tracked. Executive Leadership considers and approves corporate goals and strategies that consider the impact of Climate Risk relating to business strategies and growth opportunities impacted by climate exposure as part of an overall decision-making process that determines the corporate strategy, both short and long term. Climate Risk is considered and modeled in the Company’s ORSA Summary Report, along with the impact of various climate related scenarios (and non-climate related impact) including Natural Catastrophe & Severe Convective Storm, as examples. A subcommittee of the Board has responsibility for reviewing any investments in sectors deemed vulnerable to Climate Risk. Internal Audit is charged with ensuring the Company complies with the Climate Risk Guidance and the cross-functional committee’s Charter & Scorecard. The Compliance Department (in Corporate Legal) ensures compliance with the climate related disclosure requirements such as the Climate Risk Disclosure Survey.
Our Carbon Footprint
At Utica National, addressing Climate Risk starts at home. We have taken various steps to reduce our carbon footprint, including: robust recycling; decommissioned inefficient back-up boiler; replaced dated soft-start speed drives; replaced outdated AC units with energy-efficient models controlled by the Building Automation System; implemented LED lighting, timers, and sensors; added all new furniture and carpet that is either all or partially recycled materials; shut down all non-essential kitchen equipment and compressors; eliminated multiple printers, toner cartridge requirements and reduced paper usage; reduced output or shut down HVAC systems to vacant floors; reduced the number of restrooms in use; replaced atrium roofs and increased insulation values (R-9 to R-31); and we pursue Energy Star Compliance, among other priorities. Going forward, the Company will continue to assess, reduce, or mitigate its carbon footprint and is considering future initiatives to further reduce our carbon footprint.
Climate Risk poses various risks to the Company, including: underwriting risk, financial risk, liquidity risk, credit risk, operational risk, reputational risk, and human capital risk. We strive to keep a geographic spread of business and we monitor risks via our coastal proximity and aggregation to wind related exposures to our underwriting guidelines. We have grown substantially away from the coast to diversify the underwriting portfolio, limited our transition risk, and constantly assess any potential liability risks in our underwriting portfolio. In both our Commercial and Personal Lines offerings we: a) adopted the ISO Green Coverage Endorsements ; b) will research new product opportunities to help our policyholders adapt to climate-related risk; and c) have and will continue to prepare loss control surveys to insureds to address identified risk exposures and technical loss control support to policyholders on weather-related exposures.
The Company engages our asset managers to understand how climate risks are considered in their overall credit review process. Exposure to sectors deemed vulnerable to risks from Climate Risk is monitored and asset managers report on individual issuers and holdings that they consider at risk or which have been placed on close watch. Our investment consultant performs an annual ESG/climate risk review and scoring of our portfolios versus benchmarks to view our portfolio’s alignment with various climate scenarios. The Company invests in “green” bonds.
Metrics and Targets
The Company uses catastrophe modeling to analyze Natural Catastrophe losses as well as specific impacts to various “gates” (storm entry point locations) around the country, which could impact our underwriting portfolio. The Company sets targets for impact to surplus at risk tolerance limits and purchases CAT reinsurance to monitor compliance with our ongoing risk tolerance limits. We review exposure accumulations by distance to coast bands, develop exposure aggregation restrictions in high-risk areas, and utilize catastrophe models inform mitigation strategies, such as reinsurance purchases. The Company uses deterministic models with various scenarios including CAT & Non-CAT, (e.g., CAT 1-100, 1-250 and beyond, Climate Risk, Cyber, Pandemic, Epidemic, inflation, severe convective storm, reverse stress tests/tail events, etc.) and stochastic models.
The Company has arranged for and conducted numerous director education presentations to the Board of Directors and Company personnel. In addition, the Company is requiring the viewing of a 30+ minute Climate Risk video for each employee and Board Member in 2023. To gain a better understanding of current and future weather patterns and Climate Risk, we have met with reinsurers, our reinsurance broker and their meteorologists & climatologists, reviewed CAT models and Climate Risk models, sponsored Board of Director and Senior Leader education sessions, met with investment advisors, met with NYS DFS, attended conferences on Climate, and held a joint session with a college student risk management group to discuss Climate Risk.