[Federal Register Volume 87, Number 203 (Friday, October 21, 2022)]
[Notices]
[Pages 64134-64141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22880]


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DEPARTMENT OF THE TREASURY


Agency Information Collection Activities; Proposed Collection; 
Comment Request; Federal Insurance Office Climate-Related Financial 
Risk Data Collection

AGENCY: Federal Insurance Office, Departmental Offices, Treasury.

ACTION: Notice and request for comments.

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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 (Treasury) intends to request approval from the Office of 
Management and Budget (OMB) for the collection of information from 
certain property & casualty (P&C) insurers regarding their current and 
historical underwriting data on homeowners' insurance, as described 
below. The proposed data collection will assist FIO's assessment of 
climate-related exposures and their effects on insurance availability 
for policyholders, including whether climate change may create the 
potential for any major disruptions of private insurance coverage in 
regions of the country particularly vulnerable to climate change 
impacts. FIO will also seek to assess any related effects on insurance 
affordability for policyholders. The Paperwork Reduction Act of 1995 
(PRA) requires federal agencies to publish a notice in the Federal 
Register concerning each proposed collection of information before 
submission to OMB, and to allow 60 days for public comment in response 
to the notice. This notice complies with that requirement.

DATES: Submit comments on or before December 20, 2022.

ADDRESSES: Submit comments electronically through the Federal 
eRulemaking Portal: http://www.regulations.gov, or by mail to the 
Federal Insurance Office, Attn: Elizabeth Brown, Senior Insurance 
Regulatory Policy Analyst, [email protected], (202) 597-2869 
or Silab Mohanty, Senior Insurance Regulatory Policy Analyst, 
[email protected], (202) 945-7062, Room 1410 MT, 
Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 
20220. Because postal mail may be subject to processing delays, it is 
recommended that comments be submitted electronically. If submitting 
comments by mail, please submit an original version with two copies. 
Comments concerning the proposed data collection forms and collection 
process should be captioned as ``FIO Climate-Related Financial Risk 
Data Collection Comments.'' Please include your name, group 
affiliation, address, email address, and telephone number(s) in your 
comment. Where appropriate, a comment should include a short Executive 
Summary (no more than five single-spaced pages).

FOR FURTHER INFORMATION CONTACT: Elizabeth Brown, Senior Insurance 
Regulatory Policy Analyst, [email protected], (202) 597-
2869, or Silab Mohanty, Senior Insurance Regulatory Policy Analyst, 
[email protected], (202) 945-7062 (these telephone 
numbers are not toll-free). Persons who have difficulty hearing or 
speaking may access these numbers via TTY by calling the toll-free 
Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Background

    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. FIO's authorities 
also include monitoring ``the extent to which traditionally underserved 
communities and consumers, minorities (as such term is defined in 
section 1204(c) of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (12 U.S.C. 1811 note)), and low- and moderate-
income persons have access to affordable insurance products regarding 
all lines of insurance, except health insurance.'' \1\ In carrying out 
its duties, FIO is authorized to collect data and information on and 
from the insurance sector, including through the use of subpoenas. FIO 
is also authorized to analyze and disseminate data and information and 
issue reports on all lines of insurance, except health insurance.\2\
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    \1\ FIO Act, 31 U.S.C. 313 (c)(1)(B).
    \2\ FIO Act, 31 U.S.C. 313 (d)-(e).
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    On May 20, 2021, President Biden issued an Executive Order on 
Climate-related Financial Risk, Exec. Order No. 14030 (E.O. 14030).\3\ 
As part of its Government-wide instruction to study and take actions in 
response to climate-related financial risks, E.O. 14030 emphasizes the 
important role that the insurance sector can play. In this regard, it 
states the Secretary of the Treasury shall task FIO ``to assess 
climate-related issues or gaps in the supervision and regulation of 
insurers, including as part of the [Financial Stability Oversight 
Council's] analysis of financial stability, and to further assess, in 
consultation with States, the potential for major disruptions of 
private insurance coverage in regions of the country

[[Page 64135]]

particularly vulnerable to climate change impacts.'' \4\ On August 31, 
2021, FIO outlined its priorities with regard to climate-related 
financial risk in a request for information (RFI) on the Insurance 
Sector and Climate-Related Financial Risks.\5\ In the RFI, FIO cited 
the need for consistent, comparable, and granular data to work on its 
climate-related priorities.\6\ FIO's climate-related work will be part 
of sequential and capacity-building efforts. The initial steps are 
intended to consolidate foundational knowledge that can be used in 
future years to develop more comprehensive approaches to address 
climate-related financial risks.
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    \3\ Executive Order on Climate-related Financial Risk, E.O. No. 
14030, 86 FR 27967 (May 20, 2021), https://www.federalregister.gov/documents/2021/05/25/2021-11168/climate-related-financial-risk (E.O. 
14030).
    \4\ See Section 3(b)(i) in E.O. 14030. E.O. 14030 at 27968.
    \5\ Federal Insurance Office Request for Information on the 
Insurance Sector and Climate-Related Financial Risks, 86 FR 48814 
(August 31, 2021), https://www.federalregister.gov/documents/2021/08/31/2021-18713/federal-insurance-office-request-for-information-on-the-insurance-sector-and-climate-related (FIO RFI).
    \6\ 86 FR 48814 at 48815.
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Overview of Analysis

    In response to E.O. 14030, one of FIO's climate-related priorities 
is to assess the potential for major disruptions of private insurance 
coverage in U.S. markets particularly vulnerable to climate change 
impacts.\7\ FIO intends to further this work by proposing to collect 
data from certain U.S. insurance entities to analyze property & 
casualty (P&C) insurers' current and historical weather-related 
exposures from physical risks. Physical risks refer to ``the harm to 
people and property arising from acute, climate-related disaster events 
such as hurricanes, wildfires, floods, and heatwaves as well as longer-
term chronic phenomena such as higher average temperatures, changes in 
precipitation patterns, sea level rise, and ocean acidification.'' \8\ 
Physical risks can affect both the asset and liability side of an 
insurer's balance sheet.\9\ On the asset side, insurers may be impacted 
by impairments and market declines in the value of investments held in 
securities of companies exposed to the physical effects of climate 
change and in real estate-related collateral, such as commercial 
property loans or agricultural-related assets. On the liability side, 
increases in the frequency, severity, and geographical distribution of 
weather-related events due to climate change could lead to higher 
direct losses from property damage, as well as indirect losses such as 
from business interruption and higher reinsurance costs. Additionally, 
severe weather-related events may create a potential protection gap for 
policyholders, which is generally understood to be the difference 
between the amount of insurance that is economically beneficial and the 
amount of insurance actually purchased, i.e., when the policyholder is 
uninsured or underinsured.\10\
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    \7\ 86 FR 48814 at 48815.
    \8\ Financial Stability Oversight Council, Report on Climate-
related Financial Risk (2021), 12, https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf (FSOC Climate Report).
    \9\ When an insurer underwrites a policy and receives premiums, 
it undertakes a potential obligation to settle valid claims. The 
estimate of the insurer's obligation to pay future claims is 
reflected as a liability on the insurer's balance sheet.
    \10\ See, e.g., The Geneva Association, The Global Insurance 
Protection Gap: Assessment and Recommendations (2014), 7, https://www.genevaassociation.org/sites/default/files/research-topics-document-type/pdf_public/ga2014-the_global_insurance_protection_gap_1.pdf.
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    FIO is proposing to collect data relating to insurers' underwriting 
metrics and related insurance policy information. The proposed data is 
needed in order for FIO to identify and more accurately assess the 
financial impact of weather-related events on insurers' exposures and 
underwriting over time. FIO's analysis would assess insurance 
availability and its effects on policyholders, particularly in regions 
of the country with the potential for major disruptions of private 
insurance coverage due to climate-related disasters. This proposed data 
collection would also allow FIO to analyze the affordability of 
insurance, both nationwide and in regions of the country with the 
potential for major disruptions of private insurance coverage due to 
climate-related disasters. FIO's analysis would not focus on measuring 
the impact on earnings or capital to assess profitability or solvency 
of individual insurance companies.
    FIO's proposed data collection leverages the format of data 
regularly reported on the annual statutory filings submitted by U.S. 
insurers to the insurance regulators in the 50 states, the District of 
Columbia (DC), and the five U.S. territories (collectively, State 
Insurance Regulators). However, FIO's proposed collection differs from 
statutory filings in three important areas: (1) the collection of data 
at a more granular level (i.e., aggregated by ZIP Code rather than at a 
U.S. state level), (2) the collection of underwriting data primarily on 
an Accident Year basis (rather than Calendar Year basis), and (3) the 
proposed inclusion of certain, limited data elements not collected on 
statutory filings (e.g., replacement values, deductibles, and coverage 
limits). Further explanation regarding FIO's proposed data collection 
and the specific data items being request is provided below.

Proposed Scope of Data Collection

    FIO's proposed data collection attempts to limit the burden of data 
collection on the insurance industry while also providing FIO with 
sufficient data to achieve its assessment of climate risks as set forth 
in this notice. Below, this section describes the rationale and main 
elements of FIO's proposed data collection, which include: (1) a focus 
on insurer underwriting, (2) insurance lines of business, (3) insurers, 
(4) data elements, (5) reporting framework, (6) reporting period, (7) 
geographic granularity, (8) geographic scope, and (9) reinsurance 
impact.

Summary

    FIO's proposed analysis of physical risk would focus on P&C 
insurers' underwriting. For its analysis, FIO proposes to collect 
insurance underwriting data from insurers constituting the top writers 
(by premiums written on a national basis) in the homeowners' multi-
peril line of business, as well as insurers with the greatest market 
share in certain states that are potentially vulnerable to climate-
related disasters.\11\
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    \11\ FIO is using the term ``climate-related disasters'' to 
refer to the type of weather-related events (such as wildfires, 
floods, hurricanes, etc.) that may be produced or exacerbated by 
climate change, as distinct from non-weather related, natural events 
(such as earthquakes and tsunamis). References to ``catastrophic 
events'' may include both weather-related and non-weather-related 
events; similar (or synonymous) terms used by the insurance industry 
include ``natural catastrophes'' and ``natural disasters.''
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    FIO proposes to collect data from: (1) nationwide insurers writing 
above a premium threshold of $100 million in 2021 homeowners' insurance 
premiums; and (2) additional insurers in order to achieve an 80 percent 
market share threshold in each of 10 states that are potentially the 
most vulnerable to climate-related disasters (Potential Climate-
Vulnerable States). (See also discussion of U.S. state selection in 
``Insurers'' below.) These two categories collectively cover 213 
insurance entities (the Representative Sample Insurers) who are 
domiciled in 34 states: Alabama, Arkansas, California, Connecticut, 
Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, 
Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, 
Nebraska, New Hampshire, New Jersey, New York, North Carolina, North 
Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee,

[[Page 64136]]

Texas, Vermont, Washington, and Wisconsin.\12\
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    \12\ An insurance company is said to be ``domiciled'' in the 
state that issued its primary license. Once licensed in one state, 
the company may seek licenses in other states and most insurers 
write policies in multiple states.
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    FIO proposes collecting underwriting data for the Representative 
Sample Insurers. This data would include information regarding claims, 
premiums, and losses that correspond to data fields reported by U.S. 
insurers to State Insurance Regulators in annual filings, as well as 
additional data elements not collected on statutory filings (e.g., 
premium renewals, replacement values, deductibles, and coverage 
limits). FIO proposes requesting five years of underwriting data, 2017 
through 2021 (Reporting Period), on an Accident Year reporting basis to 
evaluate underwriting trends, including before and after periods 
corresponding to weather-related events. Finally, and in line with its 
statutory authorities, FIO proposes collecting data at a ZIP Code level 
for all U.S. ZIP Codes applicable to the Representative Sample Insurers 
in order to conduct a granular, nationwide assessment.
    Data would be collected from insurers in a specified Excel template 
to be provided by FIO (Template). A copy of the proposed Template is 
available at https://home.treasury.gov/system/files/311/FIO-Proposed-Climate-Data-Call-Template.xlsx and instructions for filling out the 
template are available at https://home.treasury.gov/system/files/311/FIO-Proposed-Climate-Data-Call-Instructions.pdf. Under the proposed 
collection, each of the Representative Sample Insurers would need to 
aggregate and report the data requested by the template at a ZIP Code 
level for all of the policies that they have written nationwide during 
the Accident Year Reporting Period.

Underwriting Focus

    Insurers face climate-related impacts and risks on both sides of 
their balance sheets: underwriting and investments. Consistent with the 
FIO Act and with FIO's direct tasking under E.O. 14030, this data 
collection focuses on obtaining data necessary to analyze the climate-
related impacts on insurers' underwriting, including any effects on 
whether coverage is available to policyholders. Recent data and events 
indicate that insurers' underwriting is directly impacted by the 
physical risks of weather-related events. For example, by one estimate, 
U.S. insured losses from weather-related events totaled $92 billion in 
2021 (with uninsured losses reaching an additional $77 billion).\13\
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    \13\ ``Facts + Statistics: U.S. Catastrophes,'' Insurance 
Information Institute, https://www.iii.org/fact-statistic/facts-statistics-us-catastrophes. Losses include those from severe 
convective storms, wildfires, drought, heatwaves, flooding, winter 
storms, and tropical cyclones.
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Insurance Lines of Business

    Multiple lines of insurance may be impacted by climate-related 
risks, such as commercial multi-peril, standalone fire, and flood 
policies. FIO's proposed data collection focuses on homeowners' multi-
peril insurance because this is the largest personal line of business 
impacted directly by weather-related events and is the most relevant in 
determining potential effects on policyholders.\14\ Multi-peril 
policies provide coverage for more than one hazard and can bundle 
together several property and liability insurance lines of business. 
Homeowners' multi-peril is often offered by insurers as an all-in-one 
insurance coverage package and may include coverage for property damage 
from a variety of perils (including wind, hail and fire, loss of use, 
theft, mold, explosion, and vandalism; however, flood is typically 
excluded).
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    \14\ See, e.g., Shanthi Ramnath and Will Jeziorski, ``Homeowners 
Insurance and Climate Change,'' Chicago Fed Newsletter, September 
2021, https://www.chicagofed.org/publications/chicago-fed-letter/2021/460.
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Insurers

    FIO's selection of insurers was based on two considerations: (1) a 
premium threshold of $100 million in 2021 homeowners' insurance 
premiums for nationwide insurers and (2) the proposed inclusion of 
certain insurers in order to achieve an 80 percent market share 
threshold in the Potential Climate-Vulnerable States. FIO aims to 
capture a representative share of the U.S. market, particularly in 
Potential Climate-Vulnerable States, while minimizing the collection 
burden by focusing on the larger insurers.
    FIO's proposed premium threshold of $100 million or more in direct 
premium written is consistent with the threshold used by 14 states and 
DC to designate insurers required to complete the National Association 
of Insurance Commissioners (NAIC) Climate Risk Disclosure Survey.
    To determine the Potential Climate-Vulnerable States for purposes 
of this proposed data collection, FIO used the Federal Emergency 
Management Agency (FEMA) data from the National Risk Index (after 
reviewing existing sources of climate vulnerability data). FEMA's 
National Risk Index is a publicly available dataset on natural hazards 
and social vulnerability, with accompanying information on methodology 
and data sources, that combines historical county level risk data 
across 18 hazard types, though it does not include projections of 
future risk due to climate change.\15\ The National Risk Index's 
detailed, county level data makes it possible to filter out risks from 
non-climate-related events. The National Risk Index also provides 
information on the Expected Annual Loss, which is a variable 
representing the average economic loss in dollars resulting from 
natural hazards each year that is calculated for each hazard type and 
quantifies loss for buildings, people, and agriculture.\16\ The 
National Risk Index has been used in both the Climate Mapping for 
Resilience and Adaptation tool released in September 2022 and by the 
National Oceanic and Atmospheric Administration as part of its Billion 
Dollar Disaster tool.\17\ In addition, insurance stakeholders have 
noted the value of the National Risk Index as a useful tool.\18\ The 
NAIC also cited the National Risk Index as a
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    \15\ ``Learn More,'' FEMA National Risk Index, https://hazards.fema.gov/nri/learn-more.
    \16\ The National Risk Index uses the term Expected Annual Loss; 
FIO understands that FEMA's definition may differ from the way 
insurers determine expected annual loss within their own business.
    \17\ ``Climate Mapping for Resilience and Adaptation,'' U.S. 
Global Change Research Program, https://resilience.climate.gov/; 
``U.S. Billion-Dollar Weather and Climate Disasters,'' National 
Centers for Environmental Information, National Oceanic and 
Atmospheric Administration, last updated October 11, 2022, https://www.ncei.noaa.gov/access/billions/.
    \18\ Insurance stakeholder comments on the National Risk Index 
appeared in response to a FEMA Request for Information on ``FEMA 
Programs, Regulations, and Policies,'' which sought feedback to 
ensure they are meeting FEMA's mission. See, e.g., Comment from 
Reinsurance Association of America (June 23, 2021), https://www.regulations.gov/comment/FEMA-2021-0011-0168; Comment from 
Insurance Institute for Business and Home Safety (July 19, 2021), 
https://www.regulations.gov/comment/FEMA-2021-0011-0204.

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[[Page 64137]]

resource for understanding risks.\19\
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    \19\ ``Reduce Your Risk Against Climate-Related Losses,'' NAIC, 
December 30, 2021, https://content.naic.org/article/reduce-your-risk-against-climate-related-losses.
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    FIO aggregated the National Risk Index's Expected Annual Loss data 
across 15 hazards that were determined to be in scope.\20\ Figure 1 
shows the 10 states with the highest Expected Annual Loss from those 15 
climate-related hazards based on FIO's use of the National Risk Index. 
FIO identified the 10 Potential Climate-Vulnerable States as an 
additional selection mechanism to ensure sufficient market coverage and 
to support more comprehensive geographic coverage. The results indicate 
that potential climate impacts are geographically dispersed throughout 
the United States.
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    \20\ FIO included the following 15 hazards that may experience 
impacts from climate change: avalanche, coastal flooding, cold wave, 
drought, hail, heat wave, hurricane, ice storm, landslide, 
lightning, riverine flooding, strong wind, tornado, wildfire, and 
winter weather. Many, but not all, of these hazards may be covered 
under homeowners' multi-peril policies (coastal and riverine 
flooding are typically covered through separate policies). FIO 
excluded earthquakes, volcanic activity, and tsunamis from its 
analysis because they are not considered to be impacted by climate 
change based on review of both the Fourth National Climate 
Assessment, https://nca2018.globalchange.gov/, and IPCC's Sixth 
Assessment Report, https://www.ipcc.ch/assessment-report/ar6/.

          Figure 1--Top 10 Potential Climate-Vulnerable States
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1.........................................  Texas.
2.........................................  California.
3.........................................  Florida.
4.........................................  Louisiana.
5.........................................  North Carolina.
6.........................................  New Jersey.
7.........................................  Missouri.
8.........................................  Illinois.
9.........................................  Iowa.
10........................................  Oklahoma.
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Source: ``National Risk Index,'' FEMA, https://hazards.fema.gov/nri/;
  FIO analysis.

    FIO proposes collecting nationwide data from additional insurers 
operating in each of these states that do not meet the first 
consideration in order to capture at least an 80 percent market share 
within each of these 10 states.

Data Elements

    The Template requests underwriting income and claims data elements. 
While some of the data elements in FIO's proposed collection are 
reported by insurers either to statistical agents and/or in the Exhibit 
of Premiums and Losses (State Page) and Schedule P of their annual 
statutory filings, not all of the fields are reported in one consistent 
template, using the same accounting methodology, and at the level of 
granularity proposed for this data collection. Annual statutory filings 
are done at a national or state level (depending on the element), while 
the proposed Template seeks these data elements aggregated at a ZIP 
Code level to more accurately assess localized trends and vulnerable 
communities, including minority and low- and moderate-income 
populations.
    FIO's proposed data collection includes financial information from 
elements that also may appear in annual statutory filings, including: 
insurer identifying information (Template cells C5 through C9), total 
year-end net admitted assets (as of 12/31 for year of reporting) 
(Template cell C10), total year-end policyholder surplus (as of 12/31 
for year of reporting) (Template cell C11), and premiums, claims, and 
losses data (Template cells H15 through R15).
    FIO's proposed data collections also includes additional fields 
that are not in statutory filings, including: (1) the number of policy 
in-force exposures (Template cell D15), (2) total dollar value of 
coverage for dwelling and/or other structures and personal property 
(Template cell E15), (3) total dollar value replacement cost value 
(Template cell F15), (4) total dollar amount of insurance deductible 
(Template cell G15), and (5) amount of direct premiums written renewed 
or retained (Template Cell P15). The data for these fields will help 
FIO assess how trends in underwriting and exposures have changed over 
time, as well as help provide information on potential protection gaps.
    FIO's proposed data collection will only assess exposures that are 
directly impacted by weather-related events. Therefore, this data 
collection aims to only include data associated with weather-related 
hazards, including, but not limited to, convective storms, drought, 
hail, hurricanes, ice, sleet, snow, tornados, wildfires, and 
windstorms, but would explicitly exclude:
    1. Liability exposures (i.e., the proposed data collection will 
include only property-related exposures);
    2. Flood insurance policies by the National Flood Insurance Program 
(NFIP) and private insurers because FEMA, which administers the NFIP, 
is conducting its own similar analyses using its publicly available 
data, and flood damage is typically not covered by standard homeowners' 
multi-peril policies which are the focus of this proposed data 
collection; FIO plans to further coordinate with FEMA on flood 
insurance data analysis; and
    3. Earthquake coverage, intentional losses caused by the 
policyholder or his agents (such as arson), acts of terror, or war 
since these are not considered weather-related events.
    FIO is not proposing at this time to collect data by type of peril. 
While loss events may include the impact of multiple perils, there may 
not currently be consistency in how insurers maintain or allocate loss 
data by peril.
    Finally, FIO recognizes that the impact of weather-related events 
may also cause an increase in claims related to additional living 
expenses. FIO will focus this proposed data collection on claims 
associated with physical damage to capture the most direct physical 
risk impact of weather-related events. While FIO acknowledges that 
additional living expenses claims can account for an increasing portion 
of weather-related losses, this form of coverage is not always a 
standard part of homeowners' insurance policies. Therefore, the 
inclusion of this expense in the analysis could distort metrics 
reflecting the direct impact of weather-related events. FIO may 
consider the inclusion of additional elements, including such expenses, 
in subsequent analyses.

Reporting Framework

    FIO proposes to use Accident Year reporting for its data 
collection.\21\ In Accident Year reporting, underwriting financial data 
is arranged such that the premiums earned in a given year can be 
compared with losses associated with claims that occurred in that same 
year. In this reporting method, the claims and any subsequent changes 
in reserves are attributed back to the period in which the loss event 
occurred and not when the loss is reported or paid. Many insurers and 
State Insurance Regulators use Accident Year underwriting financial 
data to facilitate actuarial analysis for the purposes of rate-making 
(or setting policy premiums), reserving, and analyzing losses. In its 
data collection, FIO proposes seeking Accident Year underwriting-
related financial data to monitor the development of claims from the 
same occurrence throughout the Accident Year.
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    \21\ Accident Year reporting is one of two common methods in the 
United States of reporting and analyzing insurance underwriting 
data; the other is Calendar Year reporting. Under Calendar Year 
reporting, an insurer may earn premium or incur a loss from an event 
at one point in time but may recognize those losses when claims are 
reported and settled at another point in time such as in a 
subsequent year. As a result, an insurer's Calendar Year experience 
may be considered less reflective of its underwriting experience for 
that particular year.

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[[Page 64138]]

Reporting Period

    FIO proposes asking for five years of data (2017 through 2021), 
primarily on an Accident Year reporting basis to evaluate underwriting 
trends, including before and after periods corresponding to weather-
related events. FIO also considered capital planning cycles and 
potential time lags in the collection of claims from weather-related 
events when considering the time horizon for the proposed data 
collection. Additionally, 2017 was a year of record natural catastrophe 
losses in the United States, when three of the 10 costliest natural 
catastrophes occurred.\22\ Therefore, starting from 2017 should provide 
information regarding how underwriting metrics have changed over time 
in response to significant catastrophe losses while reducing the burden 
of data reporting by focusing the scope of collection on the last five 
years of data.
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    \22\ Natural catastrophes in this estimate are defined as 
natural disasters, which are significant, destructive events with 
atmospheric, geological, and hydrological origins (e.g., hurricanes, 
earthquakes, and floods), that cause at least $25 million in insured 
losses; or 10 deaths; or 50 people injured; or 2,000 filed claims or 
homes and structures damaged. Hurricanes Harvey, Irma, and Maria 
occurred in 2017 and they were three of the ten costliest natural 
catastrophes in the United States, based on data provided by Aon. 
See ``Facts + Statistics: U.S. Catastrophes,'' Insurance Information 
Institute, https://www.iii.org/fact-statistic/facts-statistics-us-catastrophes.
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Geographic Granularity

    FIO considered multiple geographic levels at which insurance data 
could be collected for this proposed data collection. At the broader 
end of the range, FIO considered collecting data from insurance 
companies at the national or state level. In the middle of this 
spectrum, FIO considered a range of options including collection by ZIP 
Code, county, public use microdata area, or census tract. At the 
narrower end of the spectrum, FIO considered that collecting data 
related to specific latitude and longitude coordinates or building 
addresses could help pinpoint specific policies. This section outlines 
why FIO's proposed data collection includes collection at a ZIP Code 
level.
    State-wide information collected on statutory filings would not 
provide a sufficient level of granularity for FIO's data analysis. 
First, the physical risk assessment related to weather-related events 
is complicated and many weather-related events, especially secondary 
perils, have localized effects, with risk levels and loss impacts 
differing widely within a state. Collecting more granular data than at 
a state level would allow FIO to assess the effects of such localized 
events on insurance markets. For example, one industry source found 
that secondary perils caused more than 70 percent of insured losses 
from all natural catastrophes ($81 billion) in 2020.\23\ Secondary 
perils are high-frequency, low-to-medium severity weather-related 
events that may generate small-to-mid-sized losses, such as severe 
convective storms.\24\ The different occurrences of weather-related 
events can lead to different potential exposures across a given state. 
For example, data collected by the California Department of Insurance 
shows that the percentage of dwelling units in high or very high 
wildfire zones ranges from less than one percent to more than 82 
percent when assessed at a county level.\25\
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    \23\ Swiss Re Institute sigma, Natural Catastrophes in 2020: 
Secondary Perils in the Spotlight, But Don't Forget Primary-Peril 
Risk (2021), 4, https://www.swissre.com/dam/jcr:ebd39a3b-dc55-4b34-9246-6dd8e5715c8b/sigma-1-2021-en.pdf.
    \24\ See, e.g., Steve Evans, ``US Severe Weather & Convective 
Storm Losses Near $20bn in 2021: Aon,'' Artemis, November 15, 2021, 
https://www.artemis.bm/news/us-severe-weather-convective-storm-losses-near-20bn-in-2021-aon/. Severe convective storms are caused 
by warm, moist air rising from the earth, which results in a range 
of conditions including drenching thunderstorms with lightning, 
tornadoes, hail, or destructive straight-line winds. See, e.g., 
Insurance Information Institute, Severe Convective Storms: Evolving 
Risks Call for Innovation to Reduce Costs, Drive Resilience (May 
2020), 3, https://www.iii.org/sites/default/files/docs/pdf/convective_storms_wp_050520.pdf.
    \25\ California Department of Insurance, The Availability and 
Affordability of Coverage for Wildfire Losses in Residential 
Property Insurance in the Wildland-Urban Interface and Other High-
Risk Areas of California: CDI Summary and Proposed Solutions (2017), 
Appendix C, http://www.insurance.ca.gov/0400-news/0100-press-releases/2018/upload/nr002-2018AvailabilityandAffordabilityofWildfireCoverage.pdf (CDI Wildfire 
Coverage Report).
---------------------------------------------------------------------------

    Second, insurers generally price policies based on the risk in a 
localized area and such risk assessment may not be uniform for an 
entire state. Collecting ZIP Code data will allow FIO to understand 
local differences in U.S. state insurance markets, such as those 
reflected in premiums, terms and conditions, coverage, and 
availability. For example, a report by the Massachusetts Insurance 
Division shows differences across Massachusetts in the percentage of 
insurance coverage for policyholders from private markets rather than 
the residual market, the application of mandatory deductibles for wind 
coverage, and the nonrenewal rate.\26\ Additionally, the California 
Department of Insurance notes a selective pull back from new business 
and renewals in ``certain parts'' of the wildland-urban interface.\27\
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    \26\ Massachusetts Division of Insurance, Annual Home Insurance 
Report for Calendar Year 2020 (n.d.), 10, 27, 32, https://www.mass.gov/doc/the-2020-massachusetts-market-for-home-insurance/download.
    \27\ CDI Wildfire Coverage Report, 2.
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    Third, in order to fulfill its statutory mandate to assess both the 
availability of insurance products and the affordability of such 
products for vulnerable communities, including minority and low- and 
moderate-income populations, FIO plans to consider pairing underwriting 
data with demographic data. Demographic data such as socioeconomic 
status and average home prices can be readily obtained at a ZIP Code 
level. Existing statutory annual statement filings with state level 
data assist State Insurance Regulators in the prudential regulation of 
insurance companies and are not primarily intended to assess trends 
regarding whether such products are available or affordable. Analyzing 
ZIP Code information will allow FIO to understand variations in the 
availability of insurance within a given state and whether the 
available insurance within that state is affordable. These issues could 
potentially be obscured by state level averages.
    Fourth, using ZIP Code information could be less burdensome for 
insurers as they may collect ZIP Code information as part of the 
insured property address when underwriting homeowners' multi-peril 
policies, making it easier for them to aggregate data at a ZIP Code 
level for FIO's proposed data collection.
    Fifth, ZIP Codes have unique, numerical identifiers, making them 
easier to analyze than other sub-state boundaries such as counties, and 
are more stable over time. Historically, county demarcations have 
changed more frequently than ZIP Code demarcations.\28\
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    \28\ ``Substantial Changes to Counties and County Equivalent 
Entities: 1970-Present,'' U.S. Census Bureau, last updated October 
8, 2021, https://www.census.gov/programs-surveys/geography/technical-documentation/county-changes.html.
---------------------------------------------------------------------------

    Finally, the use of ZIP Code level data by seven states in certain 
circumstances (California, Florida, Illinois, Massachusetts, Missouri, 
Tennessee, and Texas) demonstrates the appropriateness of and the 
potential benefits of this level of analysis for FIO's climate-related 
financial risk analyses. The California Department of Insurance 
collected and analyzed data from fire, homeowners' multi-peril, and 
private personal auto insurers in California for all ZIP Codes in order 
to report on those communities that were considered ``underserved.'' 
\29\ The

[[Page 64139]]

business overview of Citizens Property Insurance Corporation, the 
homeowners residual market insurer in Florida, notes total insured 
value by ZIP Code and the Florida Office of Insurance Regulation 
provides ZIP Code data in some instances, such as after Hurricane 
Michael.\30\ Illinois requires that insurers report ZIP Code level data 
for certain lines of business, including homeowners' multi-peril.\31\ 
The Massachusetts Division of Insurance uses data collected from 
certain ZIP Codes to understand differences in premiums, claims and 
losses, and cancellations and non-renewals.\32\ The Missouri Department 
of Insurance ``requires insurers writing personal lines insurance to 
file data by ZIP code, including exposures written, premium written, 
loss paid count and losses paid. Data is collected on an annual 
basis.'' \33\ Tennessee conducted a catastrophic claims data call in 
2016 concerning the November 2016 wildfires in Gatlinburg as well as 
two catastrophic claims data calls concerning the impact of tornadoes 
that struck the state in 2020.\34\ Each of these three data calls 
required insurers to report claims by ZIP Code. Additionally, Texas 
initiated a data call following Hurricane Harvey that required insurers 
to report several data elements by ZIP Code, including number of 
reported claims, number of claims closed with payment, and the total 
amount of paid losses.\35\ These non-exhaustive examples illustrate 
that insurers are likely to have experience producing and submitting 
ZIP Code level information.
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    \29\ California Department of Insurance, 2015 Commissioner's 
Report on Underserved Communities: Experience Years 2010--2014 
(2015), i, http://www.insurance.ca.gov/0400-news/0200-studies-reports/0800-underserved-comm/upload/CRUC2015ReportFinal-2.pdf.
    \30\ Citizens, Corporate Analytics Business Overview (March 31, 
2022), 1, https://www.citizensfla.com/documents/20702/93064/20220331+Business+Overview.pdf/24a9e673-b3e0-c8af-31ca-43f8ca81e24d?t=1652146197003; ``Hurricane Michael Claims Data,'' 
Florida Office of Insurance Regulation, https://www.floir.com/Office/HurricaneSeason/HurricaneMichaelClaimsData.aspx.
    \31\ Illinois Department of Insurance, Instructions for Part 
4203--Insurance Data Reporting Requirements: Subpart A: Cost 
Containment Reporting (n.d.), 11, https://insurance2.illinois.gov/regulatory_filings/DataCall/ReportingInstructions.pdf.
    \32\ Massachusetts Division of Insurance, Statistical Supplement 
to the 2020 Report on the Massachusetts Market for Home Insurance 
(n.d.), 20, 48, 91, https://www.mass.gov/doc/the-2020-massachusetts-market-for-home-insurance/download.
    \33\ ``Statistical Reports,'' Missouri Department of Insurance, 
https://insurance.mo.gov/reports/.
    \34\ Tennessee Department of Commerce and Insurance, ``TDCI 
Gathers Insurers' Data For Wildfire Claims Map,'' news release, 
December 2, 2016, https://www.tn.gov/commerce/news/2016/12/2/tdci-gathers-insurers-data-for-wildfire-claims-map.html; State of 
Tennessee, Data Call Catastrophic Claims Template, 2016, https://www.tn.gov/content/dam/tn/commerce/documents/insurance/posts/Ins_TN_Wildfire_Reporting_Data_Call.xlsx; Tennessee Department of 
Commerce and Insurance, Notice of Catastrophic Claims Data Call 
Related to the March 2nd & 3rd Tornadoes (March 5, 2020), https://www.tn.gov/content/dam/tn/commerce/documents/insurance/bulletins/030520_Claims_Data_Call.pdf; Tennessee Department of Commerce and 
Insurance, Notice of Catastrophic Claims Data Call Related to the 
April 12th & 13th Tornadoes (April 21, 2020), https://www.tn.gov/content/dam/tn/commerce/documents/insurance/bulletins/042120_April_12-13_Tornadoes_Data_Call.pdf.
    \35\ Texas Department of Insurance, Hurricane Harvey Data Call: 
Data through September 30, 2018 (April 25, 2019), https://www.tdi.texas.gov/reports/documents/harvey-dc-04252019.pdf.
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Geographic Scope

    FIO is proposing to collect data from Representative Sample 
Insurers for all U.S. ZIP Codes in which they operate, for a number of 
reasons. First, consistent with FIO's statutory authorities, it would 
allow FIO to develop a nationwide understanding and assessment of how 
U.S. markets are being affected by climate-related events. 
Additionally, an individual U.S. state may have localized areas of 
potential risk to weather-related events that are obscured by state 
average metrics. Second, nationwide data allows FIO to compare relevant 
data for insurance markets that are in geographic areas with varying 
degrees of exposure to weather-related events. Nationwide data will 
also provide a national reference group that may allow FIO to control 
for trends such as rising home replacement costs that can cause 
disruption in insurance markets but are not directly tied to climate 
impacts.

Reinsurance Impact

    FIO is excluding the impact of reinsurance from this proposed data 
collection. Allocating reinsurance data for the various types of 
reinsurance (including treaty and facultative) to policy and ZIP Code 
level would require a consistency of assumptions across reporting 
insurers which is not currently available. To avoid potential double 
counting, all reporting will focus only on direct business written by 
insurers without considering the effects of reinsurance. FIO recognizes 
that the availability of reinsurance affects the availability of 
insurance for policyholders. Similarly, FIO recognizes that how 
reinsurance is priced will affect how much policyholders will pay for 
insurance and impacts insurers' financial results.

Estimate of Burden for Representative Sample Insurers

    FIO estimates that the number of Representative Sample Insurers 
required to provide information under this data collection will be 
approximately 213. FIO also estimates that it will take each 
Representative Sample Insurer between approximately 100 to 350 hours 
total to provide all of the data that the proposed data collection 
seeks for the five years (2017 to 2021).
    The overall estimated annual burden would be between approximately 
21,300 and 74,550 hours (213 Representative Sample Insurers x 100 hours 
and 213 Representative Sample Insurers x 350 hours). At a blended, 
fully loaded hourly rate of $54.27,\36\ the total cost for all 
Representative Sample Insurers to comply with the proposed data 
collection would be between approximately $1,155,951 and $4,045,829.
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    \36\ Based on data from ``Insurance Carriers and Related 
Activities: NAICS 524,'' U.S. Bureau of Labor Statistics, https://www.bls.gov/iag/tgs/iag524.htm, the average wage rate for all 
insurance employees was $40.47 in June 2022, and the total benefit 
compensation in the 1st Quarter of 2022 was 34.1 percent, which is a 
benefit multiplier of 1.341. Therefore, a fully-loaded wage rate for 
insurance employees is $54.27, or $40.47 x 1.341.
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    The majority of Representative Sample Insurers belong to insurance 
groups. As a result, such insurers may experience synergies and 
efficiencies when completing the Template. Thus, the total number of 
hours that it may take all Representative Sample Insurers to collect, 
process, and complete the Template may be less than the number of hours 
that FIO has estimated here.

Efforts To Collect Data From Other Sources

    The FIO Act requires FIO to coordinate with State Insurance 
Regulators, relevant federal agencies, and publicly available sources 
in accordance with procedures set forth in the Act before FIO seeks to 
collect the data directly from insurers.\37\ FIO has

[[Page 64140]]

determined that the data it seeks is either not available or cannot be 
obtained in a timely manner from State Insurance Regulators, relevant 
federal agencies, or publicly available sources, and therefore proposes 
to use its data collection authorities under the FIO Act.
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    \37\ 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.''
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    On June 30, 2022, FIO began the coordination process with the 
states with an email to each of the State Insurance Regulators in all 
50 states, DC, and the U.S. territories. This email described the data 
FIO would be seeking and requested from each State Insurance Regulator 
a response as to whether the regulator would be able to provide all of 
the requested data for any of the identified entities for all of the 
ZIP Codes in which the entities operate within 30 days of being asked. 
FIO continued its engagement and coordination over the next two months. 
FIO received answers from 49 states, DC, and the five U.S. territories. 
These jurisdictions indicated that they could not provide all of the 
information described in the Template for any of entities identified 
for every ZIP Code in which those entities operated. FIO had multiple 
engagements with one state that did not directly answer the question 
posed by FIO. This state indicated that it could facilitate the 
collection of the data but did not indicate that it currently had the 
data to provide to FIO. FIO has determined that the requested data from 
this state cannot be obtained in a timely manner upon request by FIO. 
Based on the responses received from the State Insurance Regulators, 
FIO has determined that the data described in the Template is either 
not available or cannot be obtained in a timely manner from any of the 
states, DC, or the five U.S. territories.
    With regard to relevant federal agencies and publicly available 
sources, FIO understands that no federal agency currently collects the 
ZIP Code level data described in the Template for all of the relevant 
entities. While some insurance policy level data is available from 
statistical agents that aggregate data obtained by State Insurance 
Regulators from insurance companies, such data is generally available 
only after paying a significant fee. Additionally, while statistical 
agents do collect some ZIP Code level data, that data is not uniformly 
collected in every state. Moreover, this data is not collected in a 
standardized format and, in some instances, lacks elements necessary 
for FIO's analysis of climate-related risk. Therefore, FIO cannot 
obtain comparable and sufficiently granular nationwide data for its 
analysis through statistical agents.

Submission of Data

    Entities classified as Representative Sample Insurers would submit 
data using the provided Template. Such insurers would be expected to 
submit the completed Template through a secure web portal provided by 
FIO within a specified time period, such as 60 days. Treasury intends 
to provide training and additional resources throughout the data 
collection period to facilitate the proper completion of reporting 
templates. Reporting under this data collection would be mandatory for 
all Representative Sample Insurers.
    Given the sensitivity of the requested data, Treasury expects to 
provide appropriate levels of confidentiality to respondents. The FIO 
Act requires FIO to maintain the privacy or confidentiality of 
submissions of non-publicly available data and information to FIO.\38\ 
Under the FIO Act, submissions pursuant to this possible 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.\39\
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    \38\ FIO Act, 31 U.S.C. 313(e)(5).
    \39\ FIO Act, 31 U.S.C. 313(e)(5).
---------------------------------------------------------------------------

    All data collection is expected to be done through a secure portal 
maintained by Treasury, and Treasury will not publish confidential 
firm-specific data from individual submissions. FIO may publish 
aggregated analyses of the submitted information.

Request for Comments

    To ensure efficient and accurate completion of the forms, FIO is 
requesting public feedback on the content of the proposed data 
collection outlined in this Notice and Request for Comments and on 
associated matters. In particular, FIO seeks comments on the following 
issues:
    1. Focus on Underwriting: FIO proposes to focus this data 
collection on insurers' underwriting for homeowners' policies to assess 
the impact of physical risk on the availability of insurance coverage 
for policyholders as well as whether the available insurance coverage 
is affordable for policyholders. Please provide your views on FIO's 
focus on insurers' underwriting.
    2. Selection of Insurance Lines: FIO proposes collecting 
information on homeowners' multi-peril policies. Should FIO consider 
data collection for any other lines of business? To what extent should 
FIO's assessment include NFIP policies and private flood insurance 
policies?
    3. Selection of Insurers: FIO proposes selecting insurers that meet 
either of the following criteria: (1) insurers writing $100 million or 
more in annual homeowners' insurance premiums in 2021 or (2) additional 
insurers that would allow FIO to capture at least 80 percent in each of 
the 10 Potential Climate-Vulnerable States identified above. Please 
provide your views on the appropriateness of these thresholds and 
whether they should be modified.
    4. Inclusion of Data Elements: The data template includes elements 
related to insurers' policies, claims, premiums, and losses. Are there 
any additional data elements you would propose to include? Are there 
any data elements you would propose to exclude? How should FIO's 
analysis consider other potential elements such as additional living 
expenses or reinsurance?
    5. Use of Accident Year Information: FIO proposes collecting ZIP 
Code level information in the Template on an Accident Year basis, 
rather than Calendar Year basis. Please provide any additional comments 
on FIO's proposed use of an Accident Year reporting framework for its 
proposed data collection.
    6. Selection of Reporting Period: FIO proposes collecting data for 
each year from 2017 through 2021. Please provide your views on the 
appropriateness of this reporting period and whether it should be 
modified by FIO.
    7. Collection at ZIP Code level: Please provide your views on FIO's 
proposal to collect data at a ZIP Code level.
    8. Collection across all Jurisdictions: FIO is proposing to collect 
nationwide data for identified insurers to allow for a nationwide 
understanding and assessment of U.S. insurance markets that may be 
affected by climate-related events. Please provide your views on FIO's 
proposal to collect nationwide data from certain insurers.
    9. Methodology for Selection of Potential Climate-Vulnerable 
States: FIO used the FEMA National Risk Index to select the ten states 
that potentially may be vulnerable to climate-related disasters. Please 
provide your views on FIO's use of the National Risk Index to select 
the Potential Climate-Vulnerable States. Are there other data source(s) 
that FIO should consider in this methodology?
    10. Burden Estimate: Please provide your views on whether FIO's 
burden estimate is accurate and whether there

[[Page 64141]]

are further ways to minimize the burden of this proposed data 
collection.
    11. Annual Collection: Please provide your views on whether FIO 
should collect this information from U.S. insurers on an annual basis.
    12. Analysis of Availability: Please provide your views on how FIO 
should assess the impact of climate-related risks on the availability 
of insurance.
    13. Analysis of Affordability: Please provide your views on how FIO 
should assess the impact of climate-related risks on the affordability 
of insurance.
    14. Additional Comments: Please provide any additional comments 
that may be relevant to FIO's proposed data collection and analyses.

Procedural Requirements

    Paperwork Reduction Act. The collection of information contained in 
this Request for Comments will be submitted to the Office of Management 
and Budget (OMB) for review as a revision to OMB Control Number 1505-
NEW under the requirements of the Paperwork Reduction Act, 44 U.S.C. 
3507(d). Comments should be sent to Treasury in the form discussed in 
the ADDRESSES section of this Request for Comments. Comments on the 
collection of information should be received within December 20, 2022.
    Comments are being sought with respect to the collection of 
information in the proposed FIO climate-related data collection. 
Treasury specifically invites comments on: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of FIO, including whether the information shall have 
practical utility; (b) ways to enhance the quality, utility, and 
clarity of the information collection; (c) whether the burden estimate 
is accurate; and (d) whether there are ways to minimize the burden, 
including through the use of automated collection techniques or other 
forms of information technology.

    Dated: October 14, 2022.
Steven E. Seitz,
Director, Federal Insurance Office.
[FR Doc. 2022-22880 Filed 10-20-22; 8:45 am]
BILLING CODE 4810-AK-P