Author Dr. Guido Funke

What is Munich Re’s position?

It is undisputed that climate change is a global problem and that individual countries or market participants alone cannot hope to solve the problem. The responsibility for ensuring that this subject is taken seriously ultimately lies with governments, the private sector and consumers. How we deal with climate change is frequently the subject of national and international political debate.

Climate protection and the question of who should pay for the costs of climate change are matters for politicians, not for compensation cases in the civil courts. Moreover, given the high transaction costs involved it would be hugely inefficient in economic terms to have such matters resolved by civil jurisdiction. The emissions trading model pursued in the Kyoto Protocol, on the other hand, is highly efficient. It endeavours to cut emissions overall and readily accepts that there are polluters that produce a lot of emissions. Against this background, it would be counter-productive and defeat the object of the system to have lawsuits against the biggest CO2 emitters. It is also worth pointing out that the principle of insurance does not work in the case of compensation claims for climate change. If everyone is partially responsible, an equal balance provided by the community of insureds cannot be realised.

Is it important for Munich Re to distinguish between direct and indirect losses?

Compensation claims based on the fact that the policyholder has contributed to climate change and thus (in part) caused a loss, in other words a direct loss, should not be carried by the insurance industry. It is different in the case of losses only indirectly related to climate change – perhaps resulting from a failure to meet consultancy obligations because policyholders such as engineers, architects or consultants have not considered the consequences of climate change (cf. D&O). Such losses are not based on climate change itself but on the fact that someone has neglected to give the subject sufficient consideration in his or her professional activity. These losses are not untypical of liability insurance.
Just as the consultancy professions have to take account of legal or social trends, they also have to consider scientific aspects such as climate change.

Our position can be summed up as follows:

• —
  Coverage but more detailed assessment of the individual aspects of indirect losses
  Compensation claims based on clear misconduct on the part of the policyholder beyond the mere emission of greenhouse gases are a standard topic for liability insurance. In such cases, especially in professional liability and D&O, Munich Re in general provides reinsurance cover and deploys underwriting instruments to deal with those instances where the policyholder’s risk management proves inadequate. For the exposed risk groups therefore, it will be necessary to examine more closely the extent to which the policyholder has taken account of climate change.
• —
  "Watching brief" and more restrictive stance on direct losses
  Claims for losses caused by a policyholder’s direct impact on the climate should not be carried by the insurance industry. Munich Re assumes that there will not be any successful lawsuits involving this point. This is due to the fundamentally political nature of the liability issues, the absence of unlawfulness and the lack of evidence proving the causality of individual losses. Even if courts should change their point of view in this regard, Munich Re will not provide any corresponding capacity.

« back  |  continue »