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The war over holding corporations liable for global warming has already started with plaintiffs filing suit against U.S. automakers earlier this year, and nobody can claim ignorance of the liability risks associated with a warming planet, according to one insurance expert.

"Nobody can claim ignorance, and there will be liability in the future. And that's interesting for the insurance industry and an opportunity for the industry to offer a liability package of products," said Dr. Peter Hoeppe, head of the Geo Risks Research team and environmental management with German reinsurer Munich Re.

Property/casualty insurers are quickly becoming more sophisticated in offering such products. One recently launched by Allianz, for example, charges drivers a little more in car insurance, and the extra premium is invested in green projects in an amount equal to the pollution emitted by the car, according to Hoeppe.

"That's how we think we can promote these things via insurance to help the climate," said Hoeppe, at a recent meeting of about 1,200 European risk executives in Geneva in October, for the biennial meeting of the Federation of European Risk Management Associations.

The property/casualty industry has a vested interested in building incentives to help clients lower the amount of carbon they release into the atmosphere. The less carbon pumped into the atmosphere, the less expensive it will be to repair damage inflicted by natural catastrophes, said Hoeppe.

Hoeppe estimated that India releases less than 1 ton of carbon dioxide per person per year. China releases 4 tons, Europe 10 tons and the United States 20 tons. And while developed nations may agree on the importance of dampening the growth of carbon dioxide as much as possible, it's difficult for developed nations, who are responsible for much of the pollution in the atmosphere, to lecture developing ones about restraint without sounding patronizing.

If current global warming trends continue, Northern Europe could come out a winner and Southern Europe could come out a loser, at least in the short term, according to Jon Cassity, a vice president with XL Financial Solutions.

Europe, he said, is in a relatively strong position compared with other areas of the world because it has an established risk pooling mechanism with a distribution infrastructure for risk transfer mechanisms, and while that may reassure institutions and corporations about their ability to handle climate change, at least in the near terms, the Continent has suffered.

Recent flooding in England and Germany in the past three years has caused record damages, and nearly everyone remembers the 2003 heat wave that killed more than 30,000 people.

Some industries, like outdoor recreation parks, would thrive according to Cassity. Others, the ski industry for example, would suffer.

"Some businesses can adapt very quickly," he said. "Retail can change product mix. Others are slow and (show) inelastic response to climate change."

But ultimately, he said, in the long term, nearly everyone would be a loser if the planet continues to warm at present rates.

CYRIL TUOHY is managing editor of Risk & Insurance®.

December 1, 2007

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