A rising tide
The insurance industry is facing a dual challenge: the escalating impacts of climate risks and the rising tide of climate-related litigation. Climate litigation is a growing global trend impacting an increasing number of corporates and involving a range of actors all around the globe.
In its 2024 report on Climate Change Litigation, the Grantham Institute identifies at least 230 new climate cases filed around the world in 2023. In Europe and the UK, cases to date have focused on enforcing government climate commitments and challenging companies’ climate change mitigation policies. However, in these jurisdictions, companies in many different sectors now face potential claims alleging environmental damage, failure to act to meet net zero and nature positive targets, failure to address material climate- and nature-related risks, and improper management or disclosure of climate risks.
In some jurisdictions in Europe, company directors may personally face claims for breach of fiduciary duties to the company or its members if they do not assess climate- and nature-related risks and act to minimise those risks which are material, for example, not taking actions to respond to environmental damage, or approving policies that contribute to increasing emissions. Greenwashing claims are on the rise in the UK and Europe and increased corporate disclosures on climate and nature give rise to increased litigation risk.
Trends in the U.S. vary, particularly across U.S. State lines. On the one hand, there is growing greenwashing class action risk along with the rising tide of ”green” marketing and disclosures. Plaintiffs are also pursuing new environment-related tort theories. At the same time, we have seen state pension funds face lawsuits alleging violation of fiduciary duties when divesting from fossil fuel investments as plaintiffs focus on the significance of pecuniary returns. Most recently, there has been a new wave of litigation challenging the SEC’s climate-related disclosure rules, which has resulted in the SEC’s decision to stay implementation of the rules.
All of these trends give rise to a volatile risk landscape for insurers. New or increased climate risk can be addressed through wordings, exclusions, sub-limits and endorsements, and we may begin to see greenhouse gas exclusions becoming more common across various policy lines and pollution exclusions (especially in liability lines) are likely to be closely scrutinized.
As climate litigation evolves, insurers must stay informed, adapt their risk models, and engage in proactive strategies to adapt to the changing risks while continuing to offer risk management to the wider commercial economy.
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Toolkit: ESG Litigation Guide
The award-winning ESG Litigation Guide provides detailed analysis of chosen European and international ESG litigation cases, both decided and pending. It includes details on the claims raised by the parties, the relevant legislation, public statements by interested parties, as well as links to judgements and press reports. You can find out more about the ESG Litigation Guide here.