Quote: “Over the past 30 years, the incidence of natural disasters has dramatically increased and the actual and future potential cost to the economy has skyrocketed. We are now in a situation where climate change is an existential risk to our future economy and way of life,” Treasury Secretary Janet L. Yellen said. “Today’s filing in the Federal Register is an important step towards assessing climate-related financial risk in the insurance sector. Ensuring that consumers have adequate information, and that the insurance industry is appropriately assessing climate-related financial risk is essential as we work to address the climate crisis.”

Why it matters: Accurately rating risks has become much more difficult, but insurers that have quality data and precision underwriting will have a considerable advantage when it comes to pricing properly. The expected rise in costs is an opportunity for securitization to mature to help provide capacity, and for the bundling of products to carefully manage risk without getting excess coverage.

Read: US Treasury Begins Inquiry Into Climate Risks in Insurance