In the Fortune Magazine article “Cloudy with a Chance of Chaos,”107 author Eugene
Linden reported,
Already the pain of weather-related insurance risks is being felt by owners
of highly vulnerable properties such as offshore oil platforms, for which
some rates have risen 400% in one year. That may be an omen for many
businesses. Three years ago John Dutton, dean emeritus of Penn State's
College of Earth and Mineral Sciences, estimated that $2.7 trillion of the
$10-trillion-a-year US economy is susceptible to weather-related loss of
revenue, implying that an enormous number of companies have offbalance-sheet
risks related to weather - even without the cataclysms a
flickering climate might bring.
In 2004, Swiss Reinsurance, a $29 billion financial giant, sent a
questionnaire to companies that had purchased its directors-and-officers
coverage, inquiring about their corporate strategies for dealing with
climate change regulations. D&O insurance, as it is called, insulates
executives and board members from the costs of lawsuits resulting from
their companies' actions; Swiss Re is a major player in D&O reinsurance.
What Swiss Re is after, says Christopher Walker, who heads its
Greenhouse Gas Risk Solutions unit, is reassurance that customers will
not make themselves vulnerable to global-warming-related lawsuits. He
cites as an example Exxon Mobil: The oil giant, which accounts for roughly
1% of global carbon emissions, has lobbied aggressively against efforts to
reduce greenhouse gases. If Swiss Re judges that a company is exposing
itself to lawsuits, says Walker, "we might then go to them and say, 'Since
you don't think climate change is a problem, and you're betting your
stockholders' assets on that, we're sure you won't mind if we exclude
climate-related lawsuits and penalties from your D&O insurance.' " Swiss
Re's customers may be put to the test soon in California, where Governor
Arnold Schwarzenegger is pushing to restrict carbon emissions, says
Walker. A customer that ignores the likelihood of such laws and, for
instance, builds a coal-fired power plant that soon proves a terrible bet
could face shareholder suits that Swiss Re might not want to insure
against.