Study: climate change increases claims exposure.

Insurers' exposure to liability claims and lawsuits is heightened by the causes of climate change and the costs to adapt, a study by three climate change experts said.

The insurance industry faces "material liability exposures to the causes and consequences of climate change and the costs of adaptation," according to the paper, Limiting Liability in the Greenhouse: Insurance Risk-Management Strategies in the Context of Global Climate Change, written by Christina Ross, manager of technical services for LaCroix Davis; Evan Mills, staff scientist at Lawrence Berkeley National Laboratory; and Scan B. Hecht, executive director of UCLA' s Environmental Law Center.

"Many of these exposures have already begun to materialize. These exposures can be direct, a function of insurers' handling of shareholder and customer interests, as well as indirect, when insurers are payers of claims faced by others," the paper said.

In the insurance industry, much attention has been given to climate change and the potential for the increase in frequency and severity of weather-related property/casualty claims. The authors state less attention has been paid to other lines of liability areas.

Insurers could be held liable in the future for covering carbon emission producers and for catastrophic weather-related events tied to climate change. In addition, insurers could face liability exposure from policies sold to carbon-intensive operations, the study said. Insurers could also face liability claims for not disclosing their climate change exposure, according to the study.

Climate Change Related Liability

* Commercial general liability claims, including negligence, personal injury and third-party business interruption due to disruptions in supply chains, transportation, utility services and communications;

* Product liability claims associated with materials or products contributing to climate change;

* Environmental liability claims for emitters of greenhouse gases based on climate change, or for secondary consequences associated with its release;

* Liability claims against corporate directors and officials involved as emitters or for failing to safeguard shareholder value from the impact of climate change;

* Political risk claims triggered by new government policies stemming from climate change; and

* Personal and commercial vehicle liability claims from increased accidents due to adverse weather.

Source: Limiting Liability in the Greenhouse: Insurance Risk-Management Strategies in the Context of Global Climate Change by Christina Ross, Evan Mills and Sean B. Hecht.

Loss/Risk Management Notes is compiled by Senior Associate Editor Meg Green.