The Insurance Exemption Isn’t Settled: What CARB’s Latest Action Signals

In February, the California Air Resources Board (CARB) took a significant step toward implementing California’s landmark climate disclosure laws, approving the first regulation under the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261).

The regulation established program fees, defined key terms, and set an August 10, 2026 deadline for Scope 1 and Scope 2 emissions reporting under SB 253, giving organizations concrete markers for how compliance will begin to take shape. SB 261 remains subject to ongoing litigation, and reporting under that law continues on a voluntary basis for now.

For insurance organizations, the February CARB update answered one question while opening another. Insurers are excluded from SB 253 under the current regulation, but CARB was simultaneously directed to revisit that position in coordination with the California Department of Insurance (CDI). That makes the exemption a live issue, not a settled one. 

Why Insurers Should Pay Close Attention

The existing exclusion was established because insurers are already subject to climate-related disclosures through the NAIC’s Climate Risk Disclosure Survey (the Survey). 

Comments during the February hearing highlighted extensive opposition to the exemption. Former California Insurance Commissioner Dave Jones and Senator Scott Wiener, author of SB 253, argued at the hearing that CARB lacks the authority to exclude an entire industry, and that the voluntary nature of the Survey makes it an insufficient substitute for the reporting SB 253 requires.

In response, CARB staff maintained that the Survey is mandatory for companies writing $100 million in premium, a lower threshold than SB 253. CARB staff also asserted their requirement to minimize duplicative reporting requirements when implementing regulations. 

The Board ultimately retained the exemption, but directed CARB staff to formally evaluate whether CDI reporting covers what SB 253 demands. If that evaluation concludes the Survey does not produce information comparable to what SB 253 requires, supplemental disclosures by insurers may be necessary to bridge the gaps.

Scope 3 Is the Next Horizon

CARB is expected to address Scope 3 requirements in a second round of rulemaking later in 2026.

For insurers, Scope 3 expands the reporting picture considerably. Emissions associated with investment portfolios and underwriting activity differ in both scale and methodology from Scope 1 and Scope 2, and they require coordination across finance, actuarial, and risk functions along with effective coordination with third parties. Questions around data ownership and consistent methodology do not resolve quickly. Waiting for final regulatory guidance before beginning that work carries real risk.

Preparing for What Comes Next

The February action moved California’s climate disclosure framework further into implementation, with additional rulemaking still ahead. Entities should use this period to develop emissions data processes and strengthen internal governance to be better positioned as requirements expand, whether the insurance exemption holds or not.If your organization is evaluating how CARB’s February update affects your reporting obligations, data readiness, or future attestation needs, Johnson Lambert can help. Reach out to our team to discuss what this means for your climate disclosure approach.