Among recent developments potentially affecting how businesses
manage their climate change risks, on March 1, 2012, Senators
Bernie Sanders (I-VT) and Sheldon Whitehouse (D-RI) hosted a press conference with representatives of
leading insurance companies to discuss the costs of climate change
on business and taxpayers. Vermont and Rhode Island experienced
extreme flood events in 2011 as a result of Hurricane Irene, which
killed at least 45 people and caused more than $7 billion in
damage. According to the sustainability advocacy
group, Ceres, property and casualty insurers experienced $44
billion in losses last year, attributable in part to more severe
and unpredictable weather conditions.
According to a statement made at the press conference, annual
weather-related claims increased from about $3 billion a year in
the 1980s to approximately $20 billion annually by 2010. Mark Way,
head of Swiss Reinsurance Company Ltd., expressed concern that a
"warming climate will only add to this trend of increasing
losses," asking Congress to act now regarding greenhouse gas
This sentiment was endorsed by Pete Thomas, chief risk officer
at Willis Reinsurance, and Franklin Nutter, president of the
Reinsurance Association of America. Speaking to this point, Mr.
Nutter concluded that "[f]rom our industry's perspective,
the footprints of climate change are around us and the trend of
increasing damage to property and threat to lives is clear."
As Senator Sanders put it, "Perhaps no industry better
understands the impact of global warming than the insurance
industry whose job it is to analyze risk."
In addition to providing representatives of the insurance
industry with an opportunity to press for regulatory changes that
may help insurers manage these risks, the event highlighted the
tension between business and insurance carriers over identifying
and attempting to quantify and cover climate change risks. Climate
change risks carry enormous complexities, ranging from causation to
predicting future impacts and the potential costs of those impacts,
including business interruption costs due to supply issues, severe
storms and flooding, and sea level changes. As part of their own
risk management planning, business leaders will need to stay alert
to the developing world of insurance coverage of climate change
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Excess insurers are taking the position that a policyholder which settles for less than the full amount of the policy limits has waived its right to obtain coverage from any of the high level insurers.