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Beyond Rising Sea Levels: Using the Insurance Asset to Manage Risk and Maximize Opportunity in the “Green” Economic Paradigm Shift

December 28, 2010 • GLOBAL ECONOMY, FINANCE & BANKING

By Lindene Patton

The green paradigm shift:

Climate change is causing much more than just rising sea levels. Climate change is changing the way we power a society that depends more heavily on power everyday; the way we transport ourselves; how we evaluate where we live and work; the way we interact with the environment; and the risk to which we are exposed in both our personal lives and in our businesses1. In other words, climate change is causing an inexorable change in the way we live, work and play by adding a new dimension of risk to our already complex environment. We need to re-think the ways we manage risk and leverage our assets to respond to these changes – including insurance.

Climate change has already begun to cause global changes in public policy, consumer demand, technology and other stakeholder demands, forcing businesses to become more ecologically and climate focused. The Kyoto protocol, the European Union Environmental Liability Directive, the California Global Warming Solution Act and Greenhouse Gases Emissions Performance Standard for Baseload Electrical Generating Resources are merely a select few of many such public policy actions. The physical reality of climate change is causing what looks to be a macro-economic shift and consequential micro-economic changes around the globe affecting a multitude of industries and business sectors.

Climate change creates both risk and opportunity. Business leaders are paying attention but not all are taking action2. Some see property risks; some see liability risks; some see opportunities for economic gain. To take advantage of the opportunities and respond to risk attendant to climate change, certain sectors of the economy must adapt or reinvent their business models. Proper enterprise risk management dictates a re-evaluation of existing risk management tools in response to this “green” paradigm shift. Insurance is one of those tools that can be used to both achieve competitive advantage and corporate social responsibility – if properly leveraged.

 
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