If it doesn't rain it pours! The fast-expanding world of environmental lawsuits is creating risks in the insurance sector.

One awakening came a year ago. Shell, it was clear at the time, was taken by surprise by a Dutch court’s decision that its climate plans weren’t sufficient and that imposed new targets for emissions reductions. The company is appealing.

 The judgment established, for the first time, that a private company had a duty to take action consistent with meeting the Paris climate goals to limit global warming, based on human rights obligations. The implications of that are still playing out.

The Bank of England used its inaugural “climate stress test” to highlight one black spot: the potential exposure of the insurance sector. Despite a doubling of climate litigation cases globally since 2015, the regulator suggested that no one had closely considered this before and, indeed, “several insurers struggled to collate and aggregate the information necessary for a robust assessment of potential exposures”.

Full FT article link below.

Further Reading

UK insurers face up to 15% fall in assets in climate-related losses stress test finds 

Floods in Australia decimate insurers’ natural hazard budgets 

Reinsurers underplay climate risk by up to half, S&P estimates 

Climate risks to add $183bn to property insurance costs by 2040, Swiss Re predicts