Climate change a growing liability for (re)insurers: Guy Carpenter

The potential liability related to climate change is a threat for the (re)insurance industry to consider, according to  Christopher Klein, head of global business intelligence at Guy Carpenter.
Liability in this context not only refers to the increased costs associated with natural disasters, but also the environment-related class actions being argued in the courtroom as well, he notes in his report Climate Change, Part III: Liabilities Heating Up. 
“Class action lawsuits have charged oil, gas and chemical companies, as well as other groups, with negligence in causing climate change and resultant property damage,” he writes. “Meanwhile, recent severe catastrophe events have stressed the (re)insurance industry’s coffers and cast doubt over the accuracy of previous risk assessments.”
If increased costs associated with natural catastrophes are linked to climate change, (re)insurers could face increased loss in high-risk regions, combined with new vulnerable locations and changing liabilities in other areas, he adds.
A decade ago, the idea of filing climate change-related lawsuits was rarely considered, Klein notes. Now, defending environment-related class actions is commonplace for corporations and (re)insurers in the United States.
Some are thrown out, but others have settled for large sums — including a US$500-million settlement for a group of activists and cities that sued U.S. government agencies for funding and insuring fossil fuel projects.
“But environmental activists may not be the only plaintiffs,” Klein warns. “Should a company’s stock stumble due to non-compliance with domestic and international carbon policies, pension funds, hedge funds, and index funds could take the case to court. Professional liability policies could be triggered by disclosure failures related to a range of issues, including pollution and the impact of regulations or environmental degradation.”