[Federal Register Volume 88, Number 211 (Thursday, November 2, 2023)]
[Notices]
[Pages 75380-75386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 https://www.reginfo.gov/public/do/PRAMain. 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 [email protected], calling (202) 597-
2869, or viewing the entire information collection request at 
www.reginfo.gov.

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), https://home.treasury.gov/system/files/311/FIO-June-2023-Insurance-Supervision-and-Regulation-of-Climate-Related-Risks.pdf.
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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, 
https://content.naic.org/article/naic-issue-data-call-help-regulators-better-understand-property-markets.
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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, https://www.nytimes.com/2023/05/31/climate/climate-change-insurance-wildfires-california.html.
    \10\ U.S. Department of the Treasury, The Impact of Climate 
Change on American Household Finances (September 2023), 12, https://home.treasury.gov/system/files/136/Climate_Change_Household_Finances.pdf.
    \11\ See, e.g., White House Council of Economic Advisors, 
Economic Report of the President (March 2023), Box 9-2, 281, https://whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf; 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, https://www.iii.org/sites/default/files/docs/pdf/2023_q2_ho_perception_of_weather_risks.pdf.
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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, https://lawinsider.com/dictionary/liability-risk.
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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, https://naic.soutronglobal.net/Portal/Public/en-GB/DownloadImageFile.ashx?objectID=9803&ownerType=0&ownerId=2006.
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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, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices.
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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, https://naic.soutronglobal.net/Portal/Public/en-GB/DownoadImageFile.ashx?objectId=9803&ownerId=2006; Massachusetts 
Division of Insurance, Annual Home Insurance Report for Calendar 
Year 2020, 11, https://www.mass.gov/doc/the-2020-massachusetts-market-for-home-insurance/download.
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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, https://www.insurance.ca.gov/0400-news/0100-press-releases/2021/upload/nr117DataNon-RenewalsandFAIRPlan12202021.pdf; 
NAIC, Property & Casualty Market Conduct Annual Statement Homeowner 
Data Call & Definitions, https://content.naic.org/sites/default/files/inline-files/industry_mcas_data_call_def_homeowners_2020.pdf. 
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.
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    \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, https://risk.lexisnexis.com/about-us/press-room/press-release/20221013-home-insurance-trends-report; Pat Howard & Kara McGinley,'' Homeowners 
Insurance Claims Statistics in 2023,'' Policygenius, December 22, 
2022, https://www.policygenius.com/homeowners-insurance/homeowners-insurance-statistics/.
    \19\AM Best, Best's Guide to Understanding the Insurance 
Industry (2023), 6, https://web.ambest.com/information-services/sales-information/best-s-guide-to-understanding-the-insurance-industry.
    \20\ See Martin Grace & Robert Klein, ``Homeowners Insurance: 
``Markets Trends, Issues and Problems,'' SSRN Electronic Journal, 
August 2003, https://www.researchgate.net/publication/228227047_Homeowners_Insurance_Market_Trends_Issues_and_Problems.
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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 https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices. 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.
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    \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.
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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.
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    \24\ ``Facts + Statistics: Homeowners and Renters Insurance,'' 
Insurance Information Institute, https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance.
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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\
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    \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.
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    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.
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    \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, https://www.bls.gov/iag/tgs/iag524.htm, 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