Climate change worries for insurers escalate as activists buy company shares - AXA XL

Climate change is the biggest worry for many insurers in the Directors & Officers (D&O) liability sector, with shareholding activism exacerbating the problem.

Claire Lofthouse, claims manager for financial institutions & cyber, at AXA XL, speaking to Intelligent Insurer during this week’s Clyde & Co conference, said: “The really interesting thing for me was seeing how certain activist groups are buying shares in order to bring actions. And then it’s a question of ….when does an institution tell me? - by the way, someone has bought some of our shares.”

Lofthouse said it would always be a concern that they might be gearing up to make a claim.

More widely, insurers themselves are facing concerns, such as the possibility that they be criticised for issuing a policy to companies such as oil producer BP.

Lofthouse said: “Quite a few insurers have come out and said they won’t be involved with coal - but what about the banks who lend money to companies who do these things?”

Regulations for companies in the UK and elsewhere have intensified, requiring companies to set out the impact of their activity on the environment.

“If directors haven’t thought about the environmental impact, that can be the basis of a claim,” she said.

Lofthouse also expressed concern about a possible increase in actions against fund managers. The issue has become topical following the plunge in value and lack of liquidity at Neil Woodford’s fund.

“It’s very hard for fund managers to do the right thing,” she said.

Losses arising from poor stockpicking are not likely to be covered by any insurance policy. However, insurers are worried about tightening regulation and the possibility that the regulator might say Woofdord should have gone one step further to protect less sophisticated investors.

“For all intents and purposes it may be that he did the right thing,” said Lofthouse. “The regulator may decide that he did but then could say we are going to tighten the rules further.”