Climate Change:

1. Climate Change: Whose Ox is Gored? Washington, D.C. ~ November 7-9, 2007

2. Whose Ox is Gored? Panel Members • MODERATOR: Fred Perez, Vice President McLarens Young International • Ken Berger, Executive Vice President Zurich NA • Sonia Hamel Climate Protection Consultant • William Stewart, Member Cozen O’Connor

3. Overview • Global Climate Change • Global Warming Litigation • US States and Regions: Laboratories of Climate Action • How the Climate Change Debate is Affecting Liability for Professionals

4. Global Climate Change

5. Global Climate Change

6. Global Climate Change

7. Climate Change: The Basics

8. THE GREENHOUSE GASES • Carbon Dioxide (CO2) • Methane • Nitrous Oxide • Chlorofluorocarbons

10. Greenhouse Gas Emissions

12. Equilibrium Global Mean Temperature

13. Expectations Agreed Upon By the International Panel on Climate Change • Results of Rise in Temperatures • Increased storms • Higher sea levels • Widespread increase in flooding • Aggravated Water Scarcity • Increased range of malaria carrying mosquitoes • Large Scale Famine • Massive Population Movement • Would likely provoke armed conflict

15. U.S. States and Regions: Laboratories of Climate Action

16. Overview • The Context for State and Regional Action • Key State Climate Plans & Policies • Regional Greenhouse Gas Initiative (RGGI) • Western Climate Initiative (WCI) • Other Notable Efforts: • Emerging Efforts in Southeast & Midwest US • The “National Climate Registry” • Applying State Lessons in the Federal Debate

17. Signs of Progress at Sub-National Level in U.S. • Governors Announcing Bold Targets • States Enacting Mandatory Caps on Emissions • Regional Agreements • Adoption of Clean Cars Programs to Limit Vehicle GHG Emissions • Local Governments Stepping Up

18. US Emissions: An International Context

19. State Climate Action Plans

20. Governors are Committing to Real Caps on Emissions • In July, FL Governor Christ established a statewide goal to reduce global warming emission to 2000 levels by 2017, 1990 levels by 2025, and 80 percent below 1990 levels by 2050. • CA Governor Schwarzenegger committed to 80% below 1990 levels by 2050 and signed a bill to reduce emissions to 1990 levels by 2020 (a 25% reduction from current levels). • NM Gov. Richardson - 2000 levels by 2010, 10% below 2000 levels by 2020 and 80% below 2000 levels by 2050. • Governors Gregoire (WA), Kulongoski (OR), Napolitano (AZ) and Blagojevich (IL) have all recently made similar commitments. • New England Governors agreement - 1990 levels by 2010, 10% below 1990 levels by 2020 and 75-85% “in the long-term”

21. Binding Caps • Early Efforts in Massachusetts and New Hampshire on power plants • The Northeast Regional Greenhouse Gas Initiative (RGGI) on Power Plants December 2005 • California Economy-Wide Cap, AB 32 Summer 2006 • Emerging Western Climate Initiative (WCI)

22. 10 States > 650 Power Plants Stabilizes emissions through 2014; 10% Reduction by 2018 13% Below 1990 Levels by 2019 NE Regional Greenhouse Gas Initiative

23. RGGI is Coming Into Place • Legislation in 5 of 10 States • Rulemakings underway • Program Launches January 2009 • First Auction in 2nd Quarter 2008

24. The Western Climate Initiative • 6 U.S. States + 2 Canadian Provinces--AZ, CA, NM, OR, WA, UT, BC & MB • Observers include: Alaska, Colorado, Kansas, Idaho, Nevada, Wyoming, Ontario, Quebec • August 2007: regional reduction goal: 15% below 1990 levels by 2020 across all sectors. • August 2008: design of a “regional market-based, multi-sector mechanism” • All participants committed to CA vehicle tailpipe standards

25. State Legislatures are Taking Action • July 2007, NJ Governor Corzine signed the Global Warming Response Act, requiring NJ to reduce it’s global warming pollution to “at or below” 1990 levels by 2020 and to 80% below current levels by 2050. • June 2007, Hawaii enacted the Global Warming Solutions Act requiring a redution of global warming emissions to “at or below” 1990 levels by 2020. • CA Gov. Schwarzenegger signed into law the Global Warming Solutions Act (AB 32), the first-ever statewide cap on global warming pollution. The law reduces annual global warming emissions in CA by 25 percent by 2020 (equivalent to 1990 levels).

26. California Statute being adopted by other states Approximately 30% Reduction by 2016 Saves more than 8 billion gallons of gasoline (more than Florida uses in a year) States (14) that have adopted or are poised to adopt: AZ, CA, CT, MA, MD, ME, NJ, NM, NY, OR, PA, RI, VT, WA Vehicle Tailpipe Standards

27. U.S. Mayors’ Climate Protection Agreement • Commitments to reduce emissions 7% below 1990 levels by 2012 (Kyoto Agreement level) • Led by Seattle Mayor Nickels • 691 mayors • All 50 States, DC and Puerto Rico • Represents 74 million Americans

28. Building a Framework for Action • There is a solution-oriented vision that is beginning to take root • A politically sustainable constituency for global warming solutions is building & will continue to happen from the ground up • Solutions are coming into place as we build the political constituency for federal efforts

29. Developments to Watch • Multi-state “national” climate registry--”The Climate Registry” • Midwest Regional Potential • State efforts informing the federal debate in Washington, DC

30. How the Climate Change Debate Is Affecting Liability for Professionals

31. Growth in customers looking for product options or companies aligned with their environmental beliefs • Environmental movement – “mainstream” culture. • A recent pulse of books, movies and even a worldwide concert indicate a generation crying louder for green solutions. • Climate change is no longer a subject found solely in National Geographic, but appears in current issues of Snowboarder Magazine, Radical Philosophy, The Economist, The Wilson Quarterly, the Harvard Business Review and a multitude of current periodicals. • The global marketplace desperately requires remedies to environmental issues and looks to businesses, scientists, and governmental leaders to provide sustainable products, services, and policy.

32. Business Executives Are Paying Attention – PWC Survey 2007

33. Potential regulatory targets – due to energy consumption and pollution patterns • Energy and power production • Educational institutions • Chemical producers • Landfills • Cement manufacturers • Manufacturers (general) • Agriculture • Land use • Health care • Construction • Transportation • Shipping / goods movement

34. Climate change will change the way we use energy to power buildings . . . and buildings themselves Also see “Green as Houses”, the Economist, September 15-21, 2007

35. Climate change will change the way we use energy to power buildings . . . and buildings themselves Potentially changing property risks

36. Climate change will change the way we use energy to power buildings . . . and buildings themselves • Institute for Business and Home Safety • Fortified for safer living standards • Wind resistant rigid foam panel walls and multi-glazed windows • Ice dam resistant • Mold resistant • Water resistant insulation

37. Growth in customers looking for product options…drives product change • Climate change will change the way we transport ourselves … 100 mpg

38. Transportation? For professionals??? • Land Use • Discuss San Bernadino litigation with CA Attorney General’s office • NEPA / CEQA violations alleged • Include GHG impacts in land use ?

39. How can public policy effect change in power usage QUICKLY? • Power grid management ? • NO – short term • YES – long term • Tax incentives ? Maybe • Rebates ? Maybe • Building permits ? YES !!!!

40. Regulation is here ….Ex: CA state-level public policy response to climate change • AB 32 (CA H&S Code Section 38500 et seq.) CA Global Warming Solution Act • SB 1368 (CA Public Utilities Code Section 8340 et seq.) GHG Emissions Performance Standard for Baseload Electrical Generation • Enacted September 2006 • Designed to reduce GHG emissions and promote energy efficient technology and power sources • Most affected parties and activities – large energy consumers

41. Architects and Engineers Increased demand for “green” and “sustainable” buildings New performance demands for designs Change in the standard of care Do you need to offer a “green” design if the client does not ask for same ? See building codes; additional changes Environmental Professionals: Expansion of concerns for land use impacts – increased GHG emissions Additional NEPA and CEQA study components Directors and Officers Financial risk ? Reputational Risk ? Where is the duty and, if there is one, to whom does it extend ? What is due care ? Disclosure ? How much? What are the applicable standards ? When is the “connection” too remote ? Is “carbon” a liability or asset or both ? Lawyers Notice ? Error ? Omission ? Environmental ? Pollutant ? Asset ? Liability ? Permitting ? Accountants Liability ? Asset ? ARO ? Impact to the professional liability underwriting practices areas ?

42. Impact to professional consultancy areas • OPPORTUNITY and RISK – key is risk management • Due diligence protocol alterations – current and historical exposure estimates ! • Must consider change to advisory and scopes • Especially for land use / development / construction / power projects • Carbon “baselines” • Know what they are and how they vary • Can you assess same ? • How can you report ? • Comparability ? • What are benchmarks and are they relevant ? • Know if this data must be disclosed like other environmental data

43. Takeaways • States and cities in the US are moving to make emissions reductions using a wide variety of regulatory approaches. • These reductions are on a par with reductions made by many other countries and are creating a framework for a workable federal approach in the long run. • Public policy actions are being taken with respect to climate change: new laws, new regulations and new actions from attorneys general and the like.

44. Takeaways • The physical realities of climate change are such that increased incidence of property damage and bodily injury in many forms are expected to occur to people and businesses. • Liability created by the public policy actions and property damages and bodily injuries may be covered within certain professional liability lines of coverage, intentionally or unintentionally. Other types of liability associated with climate change may not be insured within professional liability coverage or any other insurance coverage for that matter.

45. Takeaways • Climate Change has the potential to drastically alter risk management during our lifetimes--and the first wave of insurance related litigation is likely to be professional liability claims. • Because of its financial clout and expertise in risk assessment, the insurance industry will be at the cutting edge of the "green debate."

46. AudienceQ & A

47. Many thanks to . . . • Ken Berger • Sonia Hamel • Fred Perez • William Stewart

49. Climate Change And Risk Impacts

50. Global Warming Litigation • Natural Disasters • Regulatory Inaction • Public Nuisance