By DAN REYNOLDS, senior editor of Risk & Insurance®
BOSTON---The struggle to win the public debate over the risks of climate change is very much in doubt, according to a panel discussion on the topic held on the morning of April 26 at the Risk and Insurance Management Society's annual conference in Boston.
But that doesn't mean there isn't plenty of opportunity for insurers, according to that same group.
Swiss-based insurer Zurich, in conjunction with the nonprofit Professional Risk Managers' International Association and the environmentally focused Ceres investment group, released the results of a survey of risk managers that indicated that responsibility for managing climate change risks is very much segmented within companies.
One of the most striking results from the survey was that 25.9 percent of companies reported that there is no one in the company that is responsible for managing climate change risk. Senior management is charged with managing climate change risk in 24 percent of the companies surveyed, while risk management departments were responsible for managing that risk in 16.5 percent of companies.
There are several reasons for this, according to the panel, which included Lindene Patton, the chief climate products officer for Zurich, and Mindy Lubber, Ceres CEO.
One of the reasons why companies might be slow getting out of the box on climate change risk is that the fact that it is a relatively new risk in most people's consciousness.
"Three years ago, modelers weren't even modeling for it," said Lubber, who added that, as more regulations are imposed and more data is gathered on climate change, companies will start coming around.
"The uptake of addressing it has increased rapidly," said Lubber.
Another reason for the slow, fragmented development of climate change risk management is the heated, confusing debate that the topic engenders in political circles and in the national media. That's resulted in Washington not being able to take a firm stand on the issue, according to Zurich's Patton.
"There is a governance gap in the United States," said Lubber.
That's despite the fact that the Securities and Exchange Commission in the past three months ruled that publicly traded companies should start disclosing climate change risk in their annual reports and other SEC filings.
Still, using Lubber's language, the risks of climate change are "deep and wide" and so is the business opportunity, according to Zurich's Patton.
"I think there is opportunity across the economy," Patton said.
"We are talking about a series of risks which impact pretty much all of central services, power, water, transportation, land use. You really can't think of much that doesn't involve those categories," she said.
But she reminded listeners that the evolution in risk management, as in much of the business world, will occur where there are immediate savings.
"I think what you are seeing is that the temporal development will bifurcate," Patton said
"You will get immediate opportunity in areas where you see savings. So that I think when you see changes in green building, for example, we clearly have developed a significant business focus and improvement in supporting green building activities. Those occurred in large volumes early because the owners of the buildings saved money by changing their habits," she explained.
And in terms of winning the national debate, Lubber said:
"It is a hard debate to make people believe, even though the science is clear, that something you can't touch, smell, feel is real, but it is and the incidents--whether it is the increased storms and the increased intensity of tsunamis--we'll see that and, unfortunately, we hope it is not too late to act," Lubber said.
April 26, 2010
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