Resilience now vital as climate toll rises

Leading lawyers and experts gathered in London to warn that the global rise in natural disasters has prompted insurers to reassess coverage, at a time when legal experts are braced for a leap in climate related litigation.

The Global Connect event heard from the CEO of the British Red Cross who explained that the time had arrived for resilience to be at the top of the agenda as the costs of climate inaction continue to rise.

Beatrice Butsana-Sita added: “When it comes to disasters, 90% of those which have occurred in the 2020s have been climate related. There has been a tenfold increase in natural hazards globally.

“You do not need to be a mathematician to calculate the world is seeing a significant increase in climate driven events.”

She added that climate events have resulted in 250,000 additional deaths a year and there is a worrying trend that there are rapidly rising numbers of homes and business premises which are unable or unwilling to take out insurance to protect against natural perils.

“We cannot simply recover we need to prepare”

“The key for government, insurers, businesses and individuals to look at how to better anticipate these events,” Butsana-Sita. “Preparation for these events is far better and it costs far less than recovery.”

She continued that there needed to be greater sharing of data, forecasting and risk analysis that would allow businesses to enhance resilience.

“We cannot simply recover we need to prepare,” Butsana-Sita concluded.

A rising tide

The event saw a panel of legal experts discuss the issues around the costs and impact of climate change on businesses concludng that resilience was vital as the severity and cost of events increased.

In the USA last year there were 27 individual natural peril events which came with an economic cost of in excess of $1 billion, and the ability of risk managers to create strategies has been further impacted by regulatory concerns.

“At present there is a lot of uncertainty over what course will be taken in terms of environmental policy and the repose to the climate crisis,” said John Delascio, partner at Chicago based Hinshaw & Culbertson. “American business will feel the climate crisis regardless of the decisions taken in the White House.”

Across the world insurers are now reassessing how they approach the issue of natural peril and it will test risk managers and their businesses, delegates were told.

“Insurers understand they cannot do this alone”

“Insurers are accessing ever more data to improve modelling to get a better understanding of extreme weather events,” explained Catherine Percy partner at RPC in London. “What is clear is that they are looking to incentivise policyholders to invest in greater resilience measures. They are seeking to mitigate current and future damage risks.

“Insurers understand they cannot do this alone; they need the engagement with government and with the policyholder. Prevention is much better than cure.”

Karen Weslowski, partner with Canadian law firm Miller Thomson said there was already a move by governments and regulators to create new building codes, which will put pressure in the construction sector and architects to comply of face censure and potential legal action.

“These codes have been designed with resilience in mind and will span everything for homes to major infrastructure projects.” She added.

The impact of reluctant insurers

The panel all feared the ongoing reluctance of insurers to provide coverage for natural perils particularly in areas where there are frequent events.

The move has seen businesses unable to access cover for properties and the flip side of the recent California wildfires has been growing view within the American population that insurers have abandoned home and business owners to their fates and the consequence has been a negative view of the industry which threatens to impact future liability decisions and with its damage awards.

“Insurers have been refusing to renew or having been withdrawing policies in peril hit areas,” explained Delascio. “It has created significant fall out but the reality is that some of the buildings which have been affected in the wildfires this year have already been rebuilt several times.”

The challenge for risk managers

Anne-Sophie Branger partner with HMN & Partners in Paris said risk management strategies need to be adapted to put resilience to climate threat at the heart given the huge risks they pose.

“Businesses should prepare and they need to anticipate,” she added. “Insurers were not prepared for the climate impact and as such they have been forced to react.

“They need to support policyholders with their risk management strategies and the risks that change poses.”

In terms of liability risks the panel said global legals systems were still looking to understand the impacts, causation and with it create the legal precedents that would open the doors to a spike in claims.

In the US, there are efforts to create a “polluter pays” fund which would force fossil fuel companies to contribute to a multi-billion dollar fund which could be used to remediate the impact of climate events.

“We are not seeing a huge number of climate related litigation at present but those cases which are making their way through the legal system are being closely watched,” Percy added.