“To establish the Climate Financial Risk Committee and Climate Financial Risk Advisory Committee on the Financial Stability Oversight Council.”
No CRS summary available for this bill.
This section establishes in the Financial Stability Oversight Council (FSOC) the Climate Financial Risk Committee, consisting of staff representatives from FSOC member agencies and led by the Deputy Assistant Secretary of the Council, to (1) identify priority areas for assessing and mitigating climate-related financial risks to the financial system; (2) coordinate information sharing and common approaches across agencies; (3) collaborate with the Office of Financial Research on data compilation and analysis; and (4) provide updates to FSOC on related efforts, including regulatory incorporation, data improvements, disclosures, and risk assessments. The committee may not be terminated or modified except by Act of Congress. This section establishes in FSOC the Advisory Committee on Climate Risk, consisting of up to 30 members—including 8 climate science experts appointed by specified agency heads, 8 climate economics or financial risk experts appointed by FSOC (covering insurance, capital markets, banking, international markets, housing finance, and asset owners), representatives from research institutions, consumer/labor groups, investor networks, and other stakeholders excluding the oil or gas industry—with staggered initial terms of 1 to 3 years and removal only by 2/3 vote of FSOC agency heads. The advisory committee meets bimonthly to assist FSOC and the Climate Financial Risk Committee on climate risk identification, analysis, and mitigation; directs FSOC member agencies to develop public strategies on climate financial risk; requires FSOC to facilitate best-practices sharing and assign the Office of Financial Research ongoing research; and mandates inclusion of climate financial risk in FSOC's annual report to Congress. This section requires FSOC, in coordination with the two committees and not later than 270 days after enactment and annually thereafter, to publish a report assessing (1) climate-related risks' impact on U.S. financial stability; (2) federal and state regulators' climate risk expertise; (3) data quality and gaps; (4) property and casualty insurance trends' effects on credit markets, housing finance, and stability; and (5) practices of nonbank financial companies and large interconnected bank holding companies.
This section directs each Federal banking agency (as defined in the Dodd-Frank Act) and the National Credit Union Administration (NCUA) to update applicable supervisory guidance to include climate financial risk—including credit, liquidity, market, operational, and reputational risk—for supervised institutions with greater than $50 billion in assets. The Financial Institutions Examination Council must ensure the updated guidance is coordinated among these agencies and NCUA and shared with state regulators.
This section directs the Financial Stability Oversight Council to update its regulations governing nonbank systemically important financial institution (SIFI) designations (subpart B of 12 C.F.R. pt. 1310) to specify how the Council will incorporate climate financial risk into those determinations. (As background, such designations subject nonbank financial companies to enhanced Federal Reserve supervision if they pose risks to U.S. financial stability.)
This section directs the Federal Insurance Office to publish a report, not later than one year after enactment of this Act (which may be submitted with the report required by section 6), that (1) assesses the potential impact of climate financial risk on the U.S. insurance sector; (2) provides an update on implementation of recommendations from the office's 2023 report titled “Insurance Supervision and Regulation of Climate-Related Risks”; and (3) recommends ways to modernize and improve regulation and supervision of climate financial risk in the U.S. insurance sector.
This section directs the Federal Insurance Office (FIO) to publish, not later than one year after enactment and in consultation with the National Association of Insurance Commissioners and state insurance commissioners, a report assessing climate-related risks to state insurance markets and U.S. financial stability based on homeowners insurance underwriting data for calendar years 2023 and 2024. The required data—collected directly by FIO from insurance companies across all lines of business pursuant to its authority under 31 U.S.C. 313—must be disaggregated by ZIP code and include granular information on premiums, policies, claims, losses, limits, deductibles, non-renewals, and cancellations, consistent with the Federal Register notice at 88 Fed. Reg. 75380 (as modified by the NAIC Property & Casualty Insurance Market Intelligence Data Call). Upon request, FIO must provide the report and data to the House Committee on Financial Services, the Senate Committee on Banking, Housing, and Urban Affairs, or relevant state insurance commissioners, while ensuring no personally identifiable information is included; additionally, FIO must make subsequent reports publicly available not later than 180 days after December 31, 2025, and annually thereafter, covering data for the preceding calendar year. (FIO, established in the Department of the Treasury, monitors the insurance sector for systemic risks and gaps in regulation.)
This section expresses the sense of Congress that relevant federal financial regulatory agencies and the Department of the Treasury, including the Federal Insurance Office as applicable, should (1) join the Network for Greening the Financial System and other international organizations focused on climate financial risk; (2) formally join the Task Force on Climate-Related Financial Risks of the Basel Committee on Banking Supervision; and (3) work with international regulators on climate financial risk whenever possible, consistent with U.S. law.