ItÃ¢â‚¬â„¢s been a big week in the Big Apple for climate change, with a number of key initiatives unveiled at the C40 Large Cities Climate Summit 2007. First, the announcement of a major partnership between 16 of the worldÃ¢â‚¬â„¢s largest cities, five banks, four multinationals and the Clinton Foundation to retrofit buildings in urban areas and reduce carbon emissions. Funded by a hefty $1 billion from the banks itÃ¢â‚¬â„¢s hoped the use of more energy efficient products in retrofitting existing buildings will lead to energy savings of 20 to 50 percent. A second initiative announced yesterday will see Microsoft team up with the Clinton Foundation to develop online tools to help cities more accurately monitor, compare and reduce their greenhouse gas emissions. These new software tools, available by year-end, will be developed in conjunction with the ICLEI Ã¢â‚¬“ Local Governments for Sustainability, and the Center for Neighborhood Technology. The idea is for Microsoft to develop a single Web solution to allow cities to clearly understand their environmental footprint so they can improve their energy efficiency and reduce carbon emissions. An interesting step. For our industryÃ¢â‚¬â„¢s part, the Summit included a speech by Swiss ReÃ¢â‚¬â„¢s Roger Ferguson, who spoke of a public/private partnership approach to climate change.Ã‚
Tomorrow the UNÃ¢â‚¬â„¢s Intergovernmental Panel on Climate Change (IPCC) will release its latest report on climate change. This, the third and final IPCC volume for the year, will focus on mitigation of climate change. Among other things, it is expected to highlight how various economic steps and technologies could help limit the effects of global warming. Measures to reduce greenhouse gases and the costs associated with such action will also be weighed. Whatever its conclusions and recommendations, the report again indicates that climate change represents a key risk for countries, governments, businesses and individuals moving forward. Bear in mind a recent survey from the Economist Intelligence Unit (EIU), and sponsored by ACE, IBM and KPMG, revealed that international risk managers were least confident about how their organizations were managing climate change risk. Interestingly, survey respondents also felt that terrorism risks and human capital risks are not being handled so well.
Tomorrow sees the release by the UNÃ¢â‚¬â„¢s Intergovernmental Panel on Climate Change (IPCC) of the second volume of a study that among other things is expected to highlight the human impact of climate change and how far adaptation and mitigation can reduce this impact. So itÃ¢â‚¬â„¢s perhaps timely that LloydÃ¢â‚¬â„¢s just issued its latest climate change report Ã¢â‚¬“ Rapid Climate Change. While the LloydÃ¢â‚¬â„¢s report acknowledges that the impact of climate change is far from certain and not completely understood, it urges insurers that now is the time to start planning and modeling for a higher level of losses across the world as both the severity and frequency of weather events increase. The report explores what climate change could mean in four areas of particular relevance to the insurance industry: sea level rise, melting icecaps, flood and drought. Wherever you stand on the climate change debate, these reports are worth a read.
A landmark environmental decision out of the Supreme Court today may have significant potential implications for our industry over the long-term. In a 5-4 decision, the court said that greenhouse gases fit well within the Clean Air ActÃ¢â‚¬â„¢s definition of air pollutant and that the Act gives the Environmental Protection Agency (EPA) the authority to regulate emissions of carbon dioxide and other greenhouse gases from cars. The upshot of all this is that the federal government will now have to reconsider its refusal to regulate greenhouse gas emissions. While itÃ¢â‚¬â„¢s too soon to draw any conclusions, clearly for insurers this opinion raises the threat of increasing environmental exposures and liability-related claims going forward.
The potential link between global climate change and extreme weather continues to elicit a wide range of views.Ã‚ But whatever your perspective, it is clear that our industry is becoming involved in green issues in an ever-growing number of ways.Ã‚ From hybrid cars to green building technologies to how to manage corporate exposures to climate change, insurers are increasingly participating in the green debate.Ã‚ For example, Travelers recently said it will offer owners of hybrid cars in California a 10 percent discount on their auto insurance, bringing to 42 the total number of states in which it offers such a discount.Ã‚ Several other companies have introduced similar incentives to hybrid drivers.Ã‚ Meanwhile, FiremanÃ¢â‚¬â„¢s Fund has introduced a new coverage for green-certified buildings that will offer a discount to building owners due to the lower risk factors.Ã‚ Another education-related green initiative will see broker Marsh offer a program with Yale University from January to teach corporate board members about their fiduciary responsibility to manage exposure to climate change.Ã‚ Released earlier this year, IIIÃ¢â‚¬â„¢s report Ã¢â‚¬Å“Global Climate Change and Extreme Weather: An Exploration of Scientific Uncertainty and the Economics of InsuranceÃ¢â‚¬ by III economists L. James Valverde Jr. and Marcellus M. Andrews examines a range of issues related to global climate change and extreme weather and explores the potential implications for insurers and reinsurers going forward.Ã‚ Expect more III research on green-related industry issues in future.