Climate related disasters, claims and human rights
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The escalating threat of climate change, alongside the rise in climate litigation worldwide regarding emissions and greenwashing claims, makes it crucial for businesses to develop robust strategies for mitigating risks and protecting operations. Climate risk mitigation can involve adopting innovative insurance products and leveraging non-traditional insurers like captive insurers. It also includes investing in emerging technologies to safeguard assets against catastrophic events. For insurers, this requires accelerating efforts to assess, underwrite and manage climate risks through specialized insurance products. Additionally, enhancing transparency in climate risk management disclosures is key, both to comply with evolving regulations—such as the Office of the Superintendent of Financial Institutions’ (OFSI) updated Climate Risk Management guidance — and to strengthen the resilience of the insurance market.
Climate change and extreme weather are impacting business plans globally, across industries. Businesses face growing pressure to understand and manage climate-related risks, which pose significant challenges to operations, supply chains and profitability. Managing those risks through insurance is increasingly unpredictable—both for businesses which face rising premium and gaps in coverage, as well as for insurers assessing and underwriting in an emergent risk landscape.
Does your insurance safeguard your business from climate-related risks?
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Benedict S. Wray
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Laura Levine
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Captive insurance: Interest in captive insurance is growing, allowing companies to finance self-insured risks and access the reinsurance market, which can offer very specific insurance coverage alternatives in an uncertain environment. Captive insurance options can also provide supply-chain protection for additional coverage that may not be provided by standard business interruption insurance.
Insurance options for business coverage in uncertain environments:
Protect your interests. Understand the new trust reporting rules if you:
LLevine@blg.com
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Laura Levine
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Proposing to update regulations to cut oil and gas methane emissions by at least 75 per cent by 2030
Finalizing an emissions cap for the oil and gas sector
Launching a Green Buildings Strategy
Crafting climate plans for marine, rail, and aviation sectors
Parametric insurance: An index-based insurance policy that provides coverage for weather-related risks and natural catastrophes, based on the collection of reliable data from a third-party source such as weather stations or satellites. The claims payment amount is agreed to in advance and is triggered when the threshold is exceeded. For example, if rainfall, temperature, or wind speed exceed a certain number, the policy holder will receive payment. This coverage is a great addition to traditional commercial insurance policies and can be helpful for larger businesses, including farms and construction companies.
Canada’s energy policy is transforming. The time is now to complete your emission reduction plan – a critical task to implement ahead of 2030 reduction targets.
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Understand your businesses-specific insurance needs: In an uncertain business risk landscape, commercial insurance coverage can shift quickly and dramatically. Find appropriate coverage limits and look for innovative insurance products to ensure your business is fully protected and able to stay operational or profitable. Energy transition has also brought unique commercial insurance products and incentives for mitigating climate risk. These include renewable energy insurance, property-loss mitigation discounts, and green-building insurance.
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Take a proactive approach: Consult regularly with industry experts on in-depth climate-risk assessments that include legal, insurance, and environmental, social, and governmental (ESG) perspectives to understand your unique business needs. Plan and seek out innovative ways to protect your assets and business operations. Stay on top of climate-risk disclosure requirements and changing policies and regulations to ensure your business can stay operational if climate policies shift or insurance coverage changes.
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How can you protect your business from climate-related risks as insurance costs increase, coverage is inconsistent and the landscape is shifting quickly?
Our BLG insurance group can help you with the legal structure of alternative risk transfer solutions and, with our industry partners, help you assess, plan and mitigate climate-risks and help you proactively protect your business.
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Hydrogen investment – More effort is being put into clean hydrogen options. Hydrogen produced with renewable energy or fossil fuels that utilize carbon capture can be optimized to decarbonize many sectors where emissions reduction looks to be challenging. This may include transport, chemicals and other manufacturing industries.
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Carbon capture, utilization and storage (CCUS) – Led largely by the oil and gas industry, CCUS is a key component to reaching net-zero goals. The CCUS process captures carbon dioxide emissions and either uses them to make building materials or stores them permanently thousands of feet below the earth surface. Investment, collaboration and scaling these projects will help move us towards carbon neutrality.
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Energy transition and industry, what now?
Finalizing an emissions cap for the oil and gas sector
Proposing to update regulations to cut oil and gas methane emissions by at least 75 per cent by 2030
Take a proactive approach: Consult regularly with industry experts on in-depth climate-risk assessments that include legal, insurance, and environmental, social, and governmental (ESG) perspectives to understand your unique business needs. Plan and seek out innovative ways to protect your assets and business operations. Stay on top of climate-risk disclosure requirements and changing policies and regulations to ensure your business can stay operational if climate policies shift or insurance coverage changes.
