We didn’t start the fire: the future of recovery actions
The 40-degree temperatures experienced in July 2022 would have been extremely unlikely without human-caused climate change. This is the conclusion of World Weather Attribution (WWA). This means that the destruction of homes by wildfires in the UK, while being ignited by other causes, occurred as a result of conditions caused by the changing climate.
The WWA initiative has been conducting real-time attribution analysis of extreme weather events since 2015. The initiative is underpinned by collaboration between climate scientists at the forefront of this emerging field, including from Imperial College London, the Royal Netherlands Meteorological Institute, Princeton University, ETH Zurich, the Indian Institute of Technology Delhi, and the Red Cross/Red Crescent Climate Centre.
Of course, not all events will be as clearly attributable to climate change as the July UK heatwave, but certainly some can. WWA calculated that the India and Pakistan heatwave was 30 times more likely as a result of climate change and, with respect to the severe flooding in Germany, Luxembourg and Belgium in 2021, it increased the intensity of the maximum one-day rainfall by about three to 19%.
The fact that extreme weather events can increasingly be causally connected to climate change raises the prospect of claims by those impacted, including actions by insurers to recover their outlay. It was estimated that the 2021 flooding resulted in US$10 million of insured losses. Globally, natural disasters that year cost insurers US$120 billion.
Many millions of people are likely to be impacted by the changing climate, yet many won’t have insurance for losses arising. For those that do have insurance, it may only remain affordable if insurers can recover some/all of the potential outlay from those responsible for causing extreme weather events.
The current targets for climate-related claims include fossil fuel companies, which are certainly facing claims in numerous jurisdictions. All eyes remain on the case Lliuya v RWE AG  which is proceeding through the German courts. Mr Lliuya lives in a town situated below a lake. The water level of the lake is rising due to a melting glacier further up the mountain, which is likely, if no action is taken, to eventually engulf the town currently home to more than 100,000 people. The allegation is essentially that RWE has contributed an estimated 0.47% to global emissions, so it should therefore be liable to pay 0.47% of the cost of the works required to protect the town. If this claim succeeds (experts have recently visited the lake, a trip that had been severely delayed by the pandemic), it will set a significant precedent for the apportionment of liability.
A landmark case is also proceeding in Hawaii, which is projected to face sea level rises of more than three feet. Here, a claims is being brought against major oil and gas companies on the basis that they misled the public about the causes and risks of climate change. Those who have watched the three-part BBC documentary, ‘Big Oil v the World’, may have already made up their minds as to the defendants’ liability. As a result, a joint recovery action by a number of insurers against one or more fossil fuel giants may succeed in recovering at least a proportion of their outlay.
However, it is worth noting the ‘Global trends in climate change litigation’ report from the London School of Economics, published in June 2022. The report found that more than half of cases filed in 2021 were not against the fossil fuel giants but against companies in the food and agriculture, transport, plastics and finance sectors. Indeed, The Guardian recently reported that residents of the Indonesian island of Pari have commenced litigation in Switzerland against the cement producer, Holcim, for damages and the costs of measures required to protect the islands from rising sea levels. Given the now settled scientific position that it is human activity has caused sea levels to rise; where businesses and homes suffer flood damage, we would say that it is a case of when these recovery actions become mainstream, rather than if such claims are possible.
Litigation of this kind is likely to drive change, and while some organisations may not be able to protect themselves against claims for historic emissions, they can act now to reduce the risk of future claims. In order to achieve this, organisations need to be transparent about their current greenhouse gas emissions and put in place robust plans to reduce these emissions to net zero by 2050, if not sooner.
Weather attribution science will undoubtedly benefit those pursuing climate-related claims and, given the costs of extreme weather events, it may well transform the world of insurance recovery actions too.
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Rewriting the risk: Addressing the challenge of climate change
Our latest global report finds that the insurance industry has a central role in building wider understanding about climate-related risks and in mitigating against those risks.Find out more