Climate change litigation presents a unique set of risks and opportunities to (re)insurers, who face the challenge of understanding their current portfolio exposures to climate litigation risk, reserving for potential losses, and pricing new products that may be affected by climate litigation. However, (re)insurers have struggled to assess climate litigation risk in the face of significant uncertainty, and a recent Bank of England “climate stress test” suggests that many insurers lack the capacity to assess their exposure to climate litigation.
Beyond their financial value, climate litigation risk assessment tools are crucial because (re)insurers are uniquely positioned to develop and propagate risk disclosure and reduction techniques. Some categories of climate litigation risk, like regulatory and governance claims, are susceptible to value-positive risk mitigation techniques. By pricing litigation risk and propagating effective governance and risk assessment processes, insurers can help their clients mitigate claims by reducing the damage underlying climate liability.
In a new partnership, lawyers and researchers from the Sabin Center for Climate Change Law at Columbia Law School are conducting a broad assessment of (re)insurer climate change litigation risk. This research will ultimately support the development of climate change litigation risk models, risk mitigation strategies, and risk allocation products.
Working with the WTW Research Network, researchers at the Sabin Center have prepared an interim scoping report detailing the landscape of climate litigation risk assessment, informed by a combination of desk research and field interviews with specialists familiar with climate litigation risk analysis. This report highlights key dimensions of climate litigation risk, and charts the impact of climate litigation risk across (re)insurers’ business operations and product lines. Next, the report assesses existing qualitative and quantitative climate litigation risk modelling frameworks, and identifies key risk drivers shaping climate litigation risk. Finally, the report reviews key regulations, cases, and resources related to, informing, or affecting global climate litigation risk analysis.
As a next step, researchers at the Sabin Center will work with the WTW Research Network to finalize the scoping report, alongside an accompanying white paper synthesizing regulatory mandates and industry best practices surrounding the assessment and reduction of climate litigation risk.
Sabin Center for Climate Change Law at Columbia Law School
Since 2009, the Sabin Center has driven research in the interrelated fields of climate law, environmental regulation, energy law, and natural resources law. The Sabin Center develops legal techniques to fight climate change, trains the next generation of climate lawyers, and provides up-to-date resources on key topics in climate change law and regulation. Executive Director Michael Burger and Climate Law Fellow Martin Lockman have been working with the WTW Research Network to help better understand and manage risks from climate change litigation.
Scientists from Columbia University and the National Center for Atmospheric Research were invited to testify to the Committee on Science, Space and Technology in September, in a hearing entitled “Understanding, forecasting and communicating extreme weather in a changing climate”.
