ABSTRACT
Society’s demands on corporations to address the climate crisis are falling on the shoulders of directors and officers. Directors and officers who either shrug off these challenges, or make missteps, are facing shareholder lawsuits and regulatory investigations. D&O insurers are stepping in, like they always have, to pay for claims. But inside the familiar paradigm, something different is afoot: D&O insurers are beginning to monitor their insureds’ climate governance.
This Article argues that climate risk, unlike traditional corporate governance risk, threatens the financial viability of the insurance industry – increasing the incentives for D&O insurers to serve as climate governance monitors. By closely examining the intersection of D&O insurance and climate risk, this Article makes three novel contributions. First, it relies on qualitative interviews with insurance industry experts to provide a descriptive account of the climate risk facing the insurance industry, and how D&O insurers are starting to monitor their insureds’ climate governance in response. Second, it theorizes that this trend is likely to continue, not only for the obvious reason that D&O claims relating to climate risk are increasing, but also because both insurers and insureds benefit from improving their climate governance. Third, it makes a normative argument that invites scholars and policymakers to recognize, and fortify, D&O insurers as climate governance monitors.
Global regulators and institutional investors are searching for ways to bolster boards’ climate governance. D&O insurers should have a greater role to play in monitoring the monitors.
Miazad, Amelia, D&O Insurers as Climate Governance Monitors (February 11, 2023).
Leave a Reply