The effects of climate change are affecting insurers' riskportfolios and creating new questions for carriers to consider intheir underwriting, a brokerage firm advised yesterday.

That counsel was part of insurance broker Marsh's New Reality ofRisk series, which included a teleconference panel discussionfocusing on risk topics of interest to insurers.

At the World Economic Forum held last month in Davos,Switzerland, “Climate change was identified as one of the mostsignificant emerging risks and one that presents a huge challengenot only to the environment, but also to the world economy,” saidBrian Storms, chairman and chief executive officer of Marsh.

Mr. Storms said climate change “is also one of the mostdifficult risks to mitigate.”

“It is clear to us that no one will have all the answers tothese challenges today,” he said, “but this is a great opportunityto help shape the insurance markets and for pioneering newapproaches in responding to this global risk. It will be with usfor a long time.”

To underscore the impact, Robert Watson, the World Bank'sclimate scientist, said scientific studies show that over the past100 years greenhouse gases, which are responsible for globalwarming, have increased substantially in the atmosphere.

He said this translates into increased sea levels, extremeweather conditions, extended drought, and the spread of diseasesthat thrive in warmer climates.

Carol Browner, former head of the Environmental ProtectionAgency and a principal with the Madeline Albright Group, saiddespite Bush administration rejection of the Kyoto Protocols, aninternational agreement to reduce greenhouse gases, U.S.multinational companies are being affected by its provisions.

Firms with global operations have to respond to Europeanmandates on emissions in order to do business there, she said.

Congress, states and businesses are coming to the realizationthat greenhouse reductions are needed and are making efforts toreduce the gases on their own, Ms. Browner added.

Gary Guzy, senior vice president of Marsh and former generalcounsel for the EPA, pointed out that climate change risk cutsacross all industries and the exposure can be significant.

The recent hurricanes along the Gulf Coast underscored the needfor careful business continuity and disaster recovery planning, hesaid.

Businesses realize they need sufficient business interruptionand business liability insurance coverage because the severity ofweather events is expected to increase, said Mr. Guzy. He addedthat companies need to consider how increased sea levels and theexpansion of diseases could affect their locations.

One effort to clean up the environment involves carbon emissioncredits, which allow one company to increase its percentage ofallowable emissions by purchasing emission credit from acleaner-burning plant, he said.

Mr. Guzy said Marsh has been working with insurers to produce acarbon emissions credit guarantee program to insure the trading.Marsh is also involved in a host of other insurance productsrelated to this burgeoning field of risk, he reported.

Christopher Lang, a managing general director in Marsh'sfinancial and professional liability practice, discussed directorsand officers insurance.

He said the increased regulatory climate is requiring companyexecutives to pay increased attention to environmental exposures.Failure to disclose these issues, or not having the right corporatemechanisms in place to monitor them, he said, are becoming agrowing area for litigation against managers and board members.

Carriers are just beginning to realize the potential magnitudeof this issue, he said, and are increasing their underwritingaround it. As this issue grows, he advised that policyholders needto work ever more closely to make sure the proper coverage is inplace.