The insurance industry is responding well to the challenge of global warming producing products and striving to make clients aware of the risks they face, an attorney specializing in the practice said.

In a Web seminar on the issue of global warming, attorney William F. Stewart with the law firm Cozen O'Connor in West Conshohocken, Pa., discussed the challenges and opportunities businesses and individuals face as the Earth becomes warmer.

The Web seminar was sponsored by Malvern, Pa.-based The Professional Association of Chartered Property Casualty Underwriters.

Mr. Stewart said while there are dissenting views on the subject, the overwhelming consensus viewpoint among scientists is that global warming is occurring because of human activity, and the continued rate of warming, if nothing is done about it, could mean dire consequences for the planet.

The extent of the consequences, he said, will depend on how warm the Earth becomes, but there is growing evidence of an impact from loss of ice and permafrost in some northern regions of the globe, he noted.

Other consequences from global warming will be increased severe weather events and flooding. The changes could also bring on lethal heat conditions where some predict temperatures could get up to 110 degrees in Chicago or 112 degrees in Los Angeles. This, he said, would have “tremendous health consequences” for everyone.

The insurance industry, said Mr. Stewart, is responding to the risk of global warming and making decisions that will impact people and alter their behavior for the better.

Some European insurers have formed foundations to deal with the issue and 35 percent of the industry has introduced new insurance products to account for risks such as the replacement of green buildings.

Insurers are participating in “adaptation programs” with the introduction of new products, support of stronger building code enforcements, weather derivatives products and refusing to underwrite in areas where the risk is deemed to great, Mr. Stewart explained.

He said this action will cause builders and homeowners to reconsider building in areas susceptible to the increased risk of flooding, hurricanes or fire caused by global warming.

“The insurance industry is engaged in the climate change industry, but the challenges are just presenting themselves,” said Mr. Stewart.

Another area of concern, according to the attorney, is the rise in directors and officers litigation stemming from global warming issues.

He said some future risks could involve not properly planning for taking advantage of cap-and-trade programs to make full use of the economic advantages present.

Executives, advised Mr. Stewart, should also concern themselves with nuisance lawsuits that contend the business may have acted inappropriately or ignored the global warming issue to its detriment to shareholders.

How this ultimately may play out with pollution exclusions is another issue to be dealt with by the courts in the future, noted Mr. Stewart. The typical definition of pollution used in the exclusions, a contaminant or irritant, would not necessarily apply to carbon pollution, and insurers would need to provide the defense costs they would normally have to provide with any other shareholders suit.

A replay of the event is available through www.cpcusociety.org.

Special Reports /

Industry Responding Well To Global Warming Risk

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