| 10739 |
| State Farm Florida Insurance Company |
| Property & Casualty |
| N |
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| Does the company have a plan to assess, reduce or mitigate its emissions in its operations or organizations? If yes, please summarize. |
| Y |
| State Farm Mutual Automobile Insurance Company and its affiliates and subsidiaries (State Farm) have a long tradition of being environmentally responsible and are committed to a future where environmental values are central to the way we do business. As one component of that philosophy, State Farm has taken aggressive steps to reduce our own greenhouse gas (GHG) emissions. In addition:
• We have released our first ESG report along with our commitment to reduce our Scope 1 and 2 GHG emissions 50% by 2030. • We have provided grants to the Arbor Day Foundation totaling $1 million. • We have greatly improved the average energy efficiency of our large facilities, from an EPA Energy Star rating of 49 in 1999, to a rating of 92 in 2018; a 43-point improvement. • The motor vehicle fleet is being maintained with a number of SmartWay rated vehicles as well as hybrid, flexible-fuel and electric vehicles. We have equipped some parking garages with electric vehicle charging stations. • Our Regional Hub centers in Richardson, Texas (City Line), Tempe, Arizona (Marina Heights), and Atlanta, Georgia (Park Center), were constructed to LEED standards. Both City Line and Park Center received LEED Gold Certification. • Data Center Efficiency -- Measured average PUE numbers of 1.8 for existing production locations and 1.4 for our newest facilities which exceeds the design of 1.6 and industry average of 2.0 for enterprise data centers. (PUE or Power Usage Effectiveness, is an energy efficiency formula developed by the Green Grid to determine operating performance of data centers.) • We continue to improve our internal communication technologies and processes to reduce the amount of paper consumed and look for additional opportunities to recycle or re-use. Increased efforts on recycling include standard recycling such as glass, aluminum, cardboard, fluorescent light tubes print toners, computers and construction recycling such as steel, concrete, copper, and aluminum. • Through our 2020 paperless initiatives, we have over 3 million customers signed up for paperless billing, saving approximately 7,000 trees. • In our cafeterias and vending areas, stopped offering beverages in single-use plastic bottles removing 2.3 million single-use plastic bottles and saving over 100,000 pounds of plastic waste annually. • Additional efforts are underway in many business areas to streamline the customer communication experience and provide our customers with preferred communication channels – using electronic/paperless delivery options, and/or integrated mailings for all written communications related to sales and services. • Drive Safe and SaveTM and other innovative technologies promotes green initiatives, in part, by incentivizing fewer miles driven through lower premiums.
These actions and recognitions confirm State Farm’s position in reducing GHG emissions. State Farm is committed to a future where environmental values are key to the way we do business. We will continue to find solutions to reduce our company impacts and help build safer and greener communities. |
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| Does the company have a climate change policy with respect to risk management and investment management? If yes, please summarize. If no, how do you account for climate change in your risk management? |
| Y |
| In responding, State Farm has utilized the definition of impact of climate change risk developed for the Financial Condition Examiner’s Handbook which is: …the impact of climate change risk may be identified as any significant change in the measures of climate over an extended period of time that includes major changes in relative temperatures, precipitation, or wind patterns that occur over several decades or longer. It may include the effects from the increase in severity and occurrence of climate change-related weather events (some may include but are not limited to: thunderstorms - including severe hail and strong winds; tornadoes; hurricanes; windstorms; the aftermath of floods; heat waves; droughts; rise in sea-level; forest fires; grass fires and the resultant subsequent debilitating effects created by these events). Although State Farm does not specifically differentiate any increase or decrease in severity and occurrence of weather events to specific measures of climate, State Farm continuously measures and models risk for the perils insured under its contracts to determine its total risk exposure including those related to weather events. Over the period from 1986 - 2020, non-hurricane catastrophe losses have been increasing by an average of 2.3%, with four of the largest ten non-hurricane catastrophe years occurring in the last ten years after adjusting for policy growth. This trend is the result of several factors such as population concentration, population shift to the coastal regions and other catastrophe prone areas, land use, as well as, changes to weather patterns related to climate change. Climate change is a recognized risk category on the risk register managed by Enterprise Risk Management (ERM). ERM facilitates the risk management framework, the aggregation of risk information, and the reporting of risk issues throughout the organization and to high levels for appropriate risk oversight. Evaluating risk associated with climate change is done by the various units of the company(s) handling separate general functions, such as administrative services, investments, law department, public affairs, underwriting corporate governance and actuarial, and the information developed is reported through the ERM process. Within each function, there are several individuals and teams responsible for identifying and monitoring the potential risk and creating strategies to mitigate and manage such risk to financially sound levels. Each function team is evaluating and determining how best to approach the evaluation. For example, multiple models are used to underwrite certain exposures, including those based on historical data and others on changing weather patterns. In these efforts to evaluate and model weather related effects State Farm is continuously investing in the latest tools and improving techniques to model severe weather in order to accurately measure risk to better match risk to price of the various products. State Farm is taking several actions to address the risk of climate change, which includes maintaining a focus on environmental sustainability efforts. State Farm is committed to operating in environmentally sustainable ways and building safer, stronger, and more sustainable communities. One example of this was the establishment of an Executive ESG Steering Committee in 2020. State Farm has a senior level Environmental Working group and a dedicated cross-departmental team to execute on the State Farm environmental sustainability strategy, which focuses on supporting internal operations, strengthening and promoting community resilience, and promoting responsible business practices. State Farm promotes improved building code adoption through its federal and state lobbying efforts to help mitigate potential risk. Additionally, State Farm works with organizations across the country, such as the Insurance Institute for Business and Home Safety and the Federal Alliance for Safe Homes, engaging in research which may help protect customers from injuries, property destruction, and financial harm that can result from natural disasters. State Farm is also a member of the Build-Strong Coalition. These efforts are focused on building codes, land use, and general awareness of mitigation issues. Yes - The company has a climate change policy with respect to investment management. Risks associated with State Farm’s investments are continuously monitored and evaluated in order to preserve State Farm’s financial strength to ensure we can meet our obligations to our policyholders. State Farm’s investment analysis evaluates all material risk factors, including Environmental, Social, and Governance factors that may have an impact on a company’s future prospects, operating performance, or future valuation. Additionally, State Farm monitors and evaluates changes in climate and weather patterns in conjunction with assessments of changing sources of energy and the innovation necessary to produce economic and reliable energy. The impact of climate change is managed through diversification guidelines across various asset types to prevent concentrations in a given geographic location, industry, property type, or municipal funding. Restrictions on investments in unregulated coal-fueled energy generation limit our exposure within the utilities industry. Coastal and earthquake exposures are managed in our commercial mortgage loan and real estate portfolios and are considered when evaluating investments in municipalities. In our real estate portfolio, we focus on the efficient operation of a building in an environmentally responsible manner and we evaluate new investments to determine whether it is economically and physically feasible to achieve a LEED certification. We also annually identify capital improvement projects and building system enhancements to reduce the use of energy. Additionally, we provide financing to entities that are engaged in energy efficiency projects as well as other green initiatives as a subset of their business operations, such as municipal and state governments as well as utilities and energy companies. The Investment Committee of the Board of Directors receives regular reports of investment diversification and exposures by various classifications, including geographic, industry, and property type. |
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| Describe your company's process for identifying climate change-related risks and assessing the degree that they could affect your business, including financial implications. |
| Y |
| Applying the definition from the Financial Condition Examiner’s Handbook as indicated in response to Question #2, State Farm actively manages its exposure to all types of risk and regularly reviews its underwriting and pricing practices to manage its business to financially sound levels. State Farm regularly measures demand for its products, its liquidity and capital needs and monitors changes in reinsurance industry practices. Climate Change risk is specifically considered with all other risks being assessed which allows for analysis and discussion as part of the overall risk assessment for State Farm. Business plans are adjusted as deemed appropriate. The process of assessing the overall financial plan of State Farm which includes assessing all known risks (e.g., those related to weather, is a continuous process such that if any known risk evolves the associated strategy to manage the risk also evolves. As an example, liquidity risk management incorporates stress testing and liquidity measures along with contingency funding plans which outline strategies in the event of a funding need in excess of current cash flow.
The insurance operating policies and investment policies are designed to work together, while incorporating various stress testing scenarios, to ensure ample liquidity to meet the financial obligations we have to our policyholders.
State Farm communicates with media and various external groups around environmental sustainability as it relates to State Farm and monitors for any reputational impacts. The organization also works internally to help inform employees and agents on how environmental issues impact the business and what the enterprise is doing to decrease its impact on the environment. |
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| Summarize the current or anticipated risks that climate change poses to your company. Explain the ways that these risks could affect your business. Include identification of the geographical areas affected by these risks. |
| Y |
| Based on the definition from the Financial Condition Examiner’s Handbook as indicated in response to Question #2, State Farm expects that residential and commercial property have the greatest exposure to any significant change in frequency and/or severity and occurrence of climate change impacted weather events. However, this is not to say such events cannot impact private passenger auto and other lines of insurance but the exposure to these lines is less as there are more opportunities to mitigate or prevent loss entirely such as parking a vehicle under cover to protect against weather related events. State Farm actively manages its exposure to catastrophic events as it relates to financial solvency as part of its risk management discussed in Question #2. State Farm also researches and monitors anticipated future risks to business as a result of climate change. One example is changing customer preferences regarding vehicles (e.g. gas vehicles to electric, semi-autonomous, and autonomous vehicles).
As discussed in response to Question #2, State Farm does not specifically link the increase or decrease in frequency or severity of weather events to specific measures of climate as several different factors can affect our insurance business. State Farm continuously measures and models risk for the perils insured under its contracts to determine its total risk exposure including those related to weather events. All increases or decreases in severity and frequency of weather events that impact insured perils have a potential to affect the insurance business. The impact from climate change risk is heightened or reduced depending on an insurer’s risk exposure in a particular geographic area; risk exposure may vary insurer to insurer. Additionally, attributing an insurer’s actions in a particular geographic area as a response solely to climate change may create inaccurate impressions. Other issues in that geographic area may also be responsible for any changes made by an insurer. |
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| Has the company considered the impact of climate change on its investment portfolio? Has it altered its investment strategy in response to these considerations? If so, please summarize steps you have taken. |
| Y |
| Y |
| As discussed in previous responses, State Farm investment analysis evaluates all material risk factors into the decision making process, including Environmental, Social, and Governance factors that may have an impact on a company’s future prospects, operating performance, or future valuation. Additionally, State Farm monitors and evaluates changes in climate and weather patterns in conjunction with assessments of changing sources of energy and the innovation necessary to produce economic and reliable energy. State Farm also considers regulatory, physical and litigation risks, as well as competitiveness and return when assessing investments. State Farm continues to follow an investment management strategy discussed above. While there have been no recent adjustments to this strategy, the written investment policies are regularly reviewed to incorporate considerations which have been and continue to be factored into the fundamental investment underwriting process. We proactively seek investment opportunities that align with our investment strategies which also directly support the climate. State Farm does not have investment exposure to stand-alone coal companies. Exposure would be through diversified metals and mining companies. State Farm takes into consideration the impact of regulatory and carbon footprint in the analysis of this sector. There is some indirect exposure through investments in utilities, steel producing companies, and railroads. State Farm does not invest in unregulated coal-fueled energy generation, and we try to avoid/mitigate coal generation based on regulatory guidance and potential impact on financial credit quality. The current investment portfolio reflects support for socially responsible investments, alternative energy and wind power, commercial mortgage loan green buildings, housing, and municipal finance. We also provide financing to entities that are engaged in energy efficiency projects as well as other green initiatives as a subset of their business operations, such as municipal and state governments, utilities, and energy companies. |
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| Summarize steps the company has taken to encourage policyholders to reduce the losses caused by climate change-influenced events. |
| Y |
| State Farm encourages its customers to reduce the losses caused by severe weather events. This includes:
• Continuously investing in the most current tools and techniques available to model severe weather in order to appropriately price the risk and to manage its overall exposure to covered losses under the products offered to its customers. Through appropriate pricing, potential customers are made aware of the true cost of building or purchasing properties in weather-prone areas and are encouraged to build/purchase in lower risk areas. • Offering the impact resistant roof discount has the potential to reduce the frequency with which a roof must be replaced. • Offering other wind/fire mitigation property discounts. • In 26 states, State Farm companies are offering customers an “Energy Efficiency Upgrade Endorsement” which promotes replacement of a heating unit, A/C or water heater with equipment that is more energy efficient. • In Arizona, California, Colorado, Oregon, and Washington, State Farm is offering customers Wildfire Protection Service to help homeowners (non-renters) protect their home and property. • State Farm is in the early stages with two initiatives associated with the Insurance Institute for Building and Home Safety (IBHS) Fortified Roof designations – one that provides discounts to policyholders based on their certification level and one that allows customers to have their house rebuilt to IBHS certification post event through the Fortified Roof Upgrade endorsement. State Farm is concerned about the prospect of climate change, its potential impact on severe weather patterns, and how that potential impact may affect the business of insurance. State Farm works with organizations across the country – such as the Insurance Institute for Building and Home Safety (IBHS) and the Federal Alliance for Safe Homes (FLASH) – to help protect our policyholders from the human injuries, property destruction and financial impact that can result from natural disasters and State Farm is also a member of the BuildStrong Coalition. These efforts are focused on building codes, land use and awareness of mitigation issues.
IBHS mission remains focused on strengthening homes and businesses to prevent avoidable suffering and reduce losses. IBHS developed its 2021-2023 Disaster Safety Strategy as the next step forward in pioneering building science research and its application to real world property loss reduction. To frame IBHS’s goals being pursued under Disaster Safety Strategy, key commitments were developed to guide the way categorized under Pioneering Building Research, Proof Points for Resiliency and Consumer and Public Policy Advocacy.
As noted above State Farm supports IBHS efforts and has adopted initiatives for policyholders based on the work of IBHS. State Farm will continue to review and take appropriate action as IBHS continues to develop information and ways of strengthening homes and businesses to prevent avoidable suffering and reduce losses such as with regulations in Louisiana that allow insurance companies to provide discounts to IBHS Fortified products. |
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| Discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change. |
| Y |
| In 2021 State Farm formally launched our Environmental, Social & Governance snapshot. Our work aligns with the purpose of Building Strong Neighborhoods Together. We know that a better world tomorrow starts with a strong neighborhood today: • Environmental - Impacting the planet starts inside our walls and in our neighborhoods. Being a good neighbor means going beyond our sidewalks to being strong stewards of our planet. • Social - Building a diverse and inclusive culture where all people can develop meaningful careers and use our business as a force for good. We support our communities every day and when they need it most. • Governance - Fostering a culture of ethics, integrity and accountability to ensure we deliver on our promises to customers, agents, employees and communities.
Additionally, and similar to the response to Question #6, State Farm actively supports several organizations studying loss mitigation related to natural disasters, as well as, conducts its own research on various loss mitigation products regardless of the relationship to climate change and has done so for several years . Finally, through its federal and state lobbying efforts, State Farm promotes improved building code adoption to help mitigate potential risk.
However, this is not to say that State Farm does not recognize the impact that potentially can occur if we are not good stewards of our environment and we do conduct ourselves with this principle in mind. State Farm actively supports Green initiatives in its business activities.
As noted in earlier responses Drive Safe and SaveTM and other innovative technologies that promote green initiatives, in part, by incentivizing fewer miles driven through lower premiums. Additionally, there are many efforts underway in many business areas to streamline the customer communication experience and provide our customers with preferred communication channels – using electronic/paperless delivery options, and/or integrated mailings for all written communications related to sales and services, including billing and payment options.
State Farm continues to focus on corporate citizenship and consumer education and protection. There have been some successes including educating associates which has led to reduction in the number of paper cups used in the corporate location, therefore, reducing yearly waste in our landfills. The company practices print optimization reducing printing entirely and promotes duplex printing if printing is necessary. State Farm continues to identify recycling such as with dead trees that are used making mulch and livestock bedding reducing the use of landfills and believes education and engagement is key to environmentally sustainable efforts. |
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| Describe actions the company is taking to manage the risks climate change poses to your business including, in general terms, the use of computer modeling. |
| Y |
| State Farm monitors risk trends in relation to the perils it insures, operational business practices, customer dynamics, and reputation and brand. Increasingly the workforce desires to work for organizations which have a positive environmental impact. Customers demonstrate activism through the companies with which they do business and research indicates a preference for doing business with a company that is taking action to fight climate change. Customers have an expectation that large companies should address climate change. Employee and customer sentiment is monitored to help determine the potential impact on the organization. The organization communicates internally and externally on our efforts to address climate change and environmental sustainability. In regard to insured perils, State Farm utilizes several modeling techniques and stress tests to analyze possible loss scenarios and to manage its risk to financially sound levels. State Farm uses several catastrophe models in determining estimates for loss scenarios; these models are generally updated every few years to reflect the latest science and observed climate trends. Though these models generally are not yet able to forecast potential future impacts of climate change far into the future, many utilize climate measures, such as sea surface temperatures and drought/rainfall patterns, to ensure the view of risk is consistent with and responding to observed climate trends. Additionally, when allowed, State Farm uses several different pricing models to better match price to risk for insureds. Finally, as noted in earlier responses, these models/methods are updated as the data, techniques, and sophistication is enhanced. |