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CLIMATE CHANGE AND INSURANCE

According to the Munich Climate Insurance Initiative, an international effort of
Munich Re, the UN, World Bank and other experts,

“C L I M A T I C C H A N G E I S A L R E A D Y I N F L U E N C I N G T H E F R E Q U E N C Y A N D I N T E N S I T Y
O F N A T U R A L C A T A S T R O P H E S . . . . 2 00 1 T O 20 04 W E R E A M O N G T H E F I V E
W A R M E S T R E C O R D E D W O R L D W I D E S I N C E 1 86 1. . . . S I N C E T H E 1 97 0 S , M A J O R
TROPICAL STORMS BOTH IN THE ATLANTIC AND THE PACIFIC REGION HAVE
INCREASED IN DURATION AND INTENSITY BY ABOUT 50 PERCENT. . . .

IF THE SCIENTIFIC GLOBAL CLIMATE MODELS A RE ACCURATE, THE PRESENT

PROBLEMS WILL BE MAGNIFIED IN THE NEAR FUTURE. THESE MODELS SUGGEST
THAT WE SHOULD EXPECT: INCREASE IN THE FREQUENCY AND SEVERITY OF HEAT
WAVES, DROUGHTS, BUSH FIRES, TROPICAL AND EXTRA TROPICAL CYCLONES ,
TORNADOS , HAILSTORMS, FLOODS AND STORM SURGES IN MANY PARTS OF THE
WORLD; NEW EXPOSURES (LIKE HURRICANES IN THE SOUTH ATLANTIC); AND
MORE EXTENSIVE DAMAG E, ECONOMIC, SOCIAL, AND ENVIRONMENTAL IM PACTS
F R O M W E A T H E R - R E L A T E D D I S A S T E R S .” (S O U R C E : M U N I C H C L I M A T E I N S U R A N C E
INITIATIVE)

Pakistan’s current flooding, the worst recorded natural disaster in the country’s
history. Many scientists and analysts believe that these events are harbingers and
now it is the time to consider how insurance can protect companies against future
climate-related disruption and risk.

Till now, no one has yet successfully sued a company for climate change damage
allegedly caused by greenhouse gas (“GHG”) emissions. There are lawsuits blaming
industrial emitters for GHG emissions responsible for global warming, extreme
weather events and other natural disasters. These lawsuits have arisen across
Alaska, Washington, D.C., California and Louisiana. Awareness among stakeholders,
mostly the shareholders has resulted in resolutions that force companies to limit
their carbon emissions. Corporate executives and risk managers are becoming more
than ever concerned about business risks related to climate change.

Though the climate change issues and claims are still relatively new and not as of
yet commonly applied concepts, some businesses have already started thinking
about policies for their portfolios. Such policies include comprehensive general
liability, directors and officers liability, and first-party property damage and business
interruption policies.