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Texas lawmakers passed a bill to stop insurers from considering ESG criteria in setting rates

The Texas State Capitol. (Wikimedia Commons/Tania Dey)

By Amal Ahmed for Floodlight and the Texas Tribune

Insurers in Texas can no longer account for environmental, social or governance criteria when setting rates for almost all forms of insurance under a bill passed by the Legislature last month.

While the measure, Senate Bill 833, has no penalties and still allows companies to consider factors that are “relevant and related to the risk being insured” — even if those risks include ESG factors — insurers who testified about the bill called it an overreach, with potential negative consequences to the state’s and the nation’s insurance market.

“In the real world, we believe that any legislation of this type will put insurers in a Catch-22 situation, where they are forced by some states to utilize certain business models and quite possibly very different business models in other states,” Lee Ann Alexander, vice president of state government relations for the American Property Casualty Insurance Association, told Floodlight after the bill was approved. “This, combined with additional constraints placed on the market by the legislation, introduces unnecessary and potentially expensive complexities into the insurance marketplace.”

The bill is part of a broader, national push by the Republican Party to limit the effectiveness of ESG measures. After Texas passed an anti-ESG investing bill in 2021, four other states followed suit, with more considering putting similar laws on the books.

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