2016 will be a watershed year for Canadian business in navigating the shoals of carbon policy and economic transition, according to a wide ranging report on the top ten legal risks affecting business, released by Borden Ladner Gervais LLP (BLG), a national, full-service Canadian law firm focusing on business law, commercial litigation and arbitration, and intellectual property.
Climate change was listed as the number one issue, with several others in the top ten being various branches of cyber risk, all of which weigh heavily on insurers.
In Alberta, Premier Rachel Notley recently announced a far-reaching and comprehensive climate change strategy, with sweeping new regulatory requirements for the electricity, oil and gas industries. Ontario has also proposed a cap and trade program, to take effect in 2016, which will be its primary vehicle to achieve emissions targets. De-carbonization and structural changes to the oil and gas industry will have significant commercial implications, for example, on manufacturers in Central Canada, large energy consumers and overall currency valuation, the BLG report said.
“Climate change is our number one risk – how is that a legal risk?” Andrew Harrison, managing partner at BLG, said to Insurance Business. “Well we had a recent change of government and a clear change from the last government to implement clear actions to reduce the effect of carbon emissions in the economy.
“So the moment you start talking about a cap on carbon trade or emissions it has an effect on the broader economy as a whole and becomes a legal issue because these restrictions are imposed by rules and no matter where you are in the economy, they will affect you.”
Harrison said this has a direct impact on insurers because of well documented issues like flooding and catastrophic weather. “The gap between what’s covered by insurance and what’s not covered is scary. Overland flooding often not covered, so a sewer backup might be, but water coming in through the basement window might not be,” he said.
But also the new rules and regulations brought in to address carbon emissions will also open doors to brokers and insurers to develop new products. “When you change the way people do business they turn to their insurers to mitigate the new exposure to risk they have,” Harrison said.
