Environmental concerns also factor in to insurance contracts in less obvious ways, according to Warren Diogo, a climate-change specialist in the risk consulting practice of Marsh. For companies covered by the EU's emissions-trading scheme, for example, business interruption insurance could be expanded to take account of CO₂ allowances on their balance sheets. So if a power company loses the use of a gas-fired plant, requiring it to ramp up a more carbon-intensive coal plant, the unforeseen additional CO₂ allowances needed to offset the event could be covered by insurance, he says.

Finally, although climate change is often thought of as a vague, looming threat, it has the potential to affect corporate directors in a personal way. Investors have filed 47 resolutions related to climate change at US-listed companies so far this proxy season, according to shareholder watchdog ISS. Institutional investors are also agitating for greater disclosure of climate-related risks. In February, the Carbon Disclosure Project, a group of nearly 300 investment groups managing €30 trillion of assets, sent questionnaires to the 2,400 largest listed companies in the world. Insurers will be scrutinizing responses to the flagship project to evaluate D&O exposure, says Diogo. "There is definitely the potential for liability against directors and officers for a lack of—or ineffective—action on climate change."

Inevitably, US courts are now dealing with the first batch of lawsuits against companies accused of contributing to climate change. "Some lawyers say it's legally impossible to make the connection between global warming and corporate liability," notes Dan Anderson, a professor of risk management and insurance at the University of Wisconsin. He heard the same sort of arguments, he adds ominously, in the early stages of the asbestos cases.

Additional reporting by John Goff.

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