OPINION: Insurance firms fear climate chaos

The insurance industry ran a climate change conference earlier this month and it was a sell-out. This was because its people worry more than most that they will be left with the bill when storms, floods, crop failures and coastal erosion take their toll.

One speaker said the Thames Gateway zone from Canary Wharf down to the Dartford Bridge is expected to have to accommodate one million extra people in the next 20 years, but is so at risk from flooding as sea levels rise that their new homes might be uninsurable.

In spite of this shocker the real insight was that the threat comes from what climate change could do to the value of insurance company assets, not the cost of their liabilities. The worry is not the extra money which will have to be paid out on claims but rather the damage climate change could do to the value of insurance industry investments. The core message was that climate change could seriously damage share prices. And the trans­mission mechanism by which this would happen is right at the crossroads of PR and business strategy.

Two major concerns were expressed. The first was litigation. The insurers believe that public tolerance of heavy polluters is limited and companies can expect a rash of legal actions not unlike those which have plagued the tobacco industry.

Ideally companies have strategies which do not provoke litigation but they also have to ensure that their internal communications are sound, and that there are no rogue emails and memos tucked away in files which could prove devastating years hence if they surface in court.

Second, companies without transparent strategies to offset their carbon emissions will suffer significant reputational damage which could threaten the viability of their businesses. This does not mean that all heavy carbon emitters would be put out of business.

It does mean that the power generators, oil companies and airlines have to take steps to minimise the impact of what they do. It means even more that the public have to be made aware of these steps and understand their significance. Companies must plan for a level of engagement which they have never undertaken before.
anthony.hilton@haymarket.com

Anthony Hilton is City commentator on London's Evening Standard

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