Climate change: potential liabilities for business, directors, trustees and insurers This was the event that drew in an audience of over 90 delegates on 13 April at Staple Inn Hall, London. Chaired by Michael Tripp and organised by the Resource and Environment Board, the event saw pension consultants, trustees, investment managers, insurers, regulators and environmental nongovernmental organisations (NGOs) in attendance. Mark Carney had set the scene in his speech last September, where he broadly divided climate change impacts between: ● Physical risks: from floods and storms etc ● Liability risks: if losses arising from climate change can be attributed to polluters ● Transition risks: such as the impact of carbon taxes and quotas on fossil fuel reserves. The focus of this event was liability risks and Professor Myles Allen (pictured below) from the University of Oxford opened proceedings by describing the relatively new science of climate attribution. This aims to quantify the probability that any particular weather event was caused or worsened by greenhouse gas emissions. For example, “it is likely (90% confidence) that past human influence on climate was responsible for at least half the risk of the 2003 European summer heat-wave”. The models and the mathematics to justify such statements are complex. Using such evidence, the legal basis for claims was taken up by Richard Lord QC. He outlined the formidable difficulties faced by claimants in proving, on the “balance of probabilities”, that a particular polluter should be held responsible for any particular damage, when greenhouse gas emissions are a global phenomenon. However, these difficulties are not insurmountable, and some courts are willing to entertain such arguments. A commercial view was then given by Chris Warrior, an underwriter with Hiscox in the Lloyd’s insurance market. His expertise is in insurance for directors of businesses, and he said that liability risks have yet to make a significant impact. However, he noted the potential exposure of directors, given their responsibility to ensure that material risks are properly recognised and disclosed. He mentioned the recent investigation launched by the New York attorney general as to whether ExxonMobil had misled investors, and the potential for huge fines in such cases if sustained. The final speaker was Alice Garton, a lawyer from ClientEarth, an NGO using the law to protect the environment. She also drew attention to the obligations of directors to approach climate change as a risk management issue and to make proper disclosure. She noted that the first successful cases against the tobacco industry were won because they had deliberately suppressed their own evidence and misled the public. Climate-related disclosure requirements are likely to increase, and she mentioned the current Financial Stability Board taskforce developing voluntary global standards. With regard to trustees, where both investments and sponsors may be exposed to climate risks, a risk management approach was again advocated. She noted that there are various potential litigants, ranging from scheme members to litigation funders (a novel form of alternative investment), not forgetting regulators. To sign up to the Resource and Environment newsletter for all the latest developments, log into your member area at www.actuaries.org.uk and select the ‘contact preferences’. Rex Features
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Appeal tribunal panel On 26 November 2015, the appeal tribunal panel (ATP) considered an appeal against a finding of misconduct made by the disciplinary tribunal panel (DTP) of the Institute and Faculty of Actuaries on 11 November 2014 against Mr Pablo Luis Morales regarding his work in the capacity of an actuary and director at an insurance company. The findings of the DTP were that Mr Morales should not have authorised the signing of accounts while they contained a reserving figure he thought was inappropriate, against the background of having done no further work to try to reconcile the differences, and while they contained a statement that the directors, of whom he was one, were confident of the level of reserves when he was emphatically not. The ATP found that these were findings open to the DTP on the evidence – indeed, on Mr Morales’ own evidence in large part – and that it would have made the same findings on the same evidence. The ATP also found that the DTP clearly had regard to the fact that Mr Morales had secured an outside review, that he had taken and followed legal advice, that the accounts contained notes and that Mr Morales had communicated his concerns to fellow board members. The ATP considered that it appeared, from the DTP’s reasons, that it regarded this as significant mitigation but not as a defence to the charge. Having considered the same evidence, the ATP was of that view that it would have made the same finding. The ATP rejected Mr Morales’ argument that, since his actions were exclusively those of a director, the IFoA did not have the power to discipline him, holding instead that his conduct fell within the definition of misconduct contained within paragraph 1.6 of the scheme. The appeal against the finding of misconduct was therefore dismissed and the finding and sanction remained as: ● Reprimand. The ATP separately heard an application for costs on 12 April 2016 and made the following award in favour of the IFoA: ● Costs in the sum of £8,500, exclusive of VAT. A copy of the panel’s full determination, including reasons for its decision and costs, can be found at bit.ly/1SDZC6c
Disciplinary tribunal panel On 25-27 January 2016, the disciplinary tribunal panel (DTP) considered a charge of misconduct against the respondent, Mr Martin Binns, in that having held responsibility for the VAT affairs of a trust, he failed to submit VAT returns with HMRC by the due date for each quarter from October 2010 – September 2011 and failed to communicate with the trustees in a timely manner in respect of surcharges levied as a result. The panel found that, having been the face of the company responsible for the VAT affairs of the trust, and having engaged in and taken responsibility for its VAT administration, Mr Binns then failed to lodge four consecutive VAT returns for in excess of one year; did not communicate this fact to his client; and it was his client that had to remind him. He then filed returns within a relatively short period without needing to ask the client any further information (so that, plainly, it was not the trust’s fault that the VAT returns had not been submitted). He did not correspond with the trust about the VAT returns, or the absence of submitting them. The panel found the respondent’s shortcomings meant he fell far below the standard expected of an actuary. It found the respondent guilty of misconduct, and imposed the following sanction: ● A fine of £7,500. The panel also ordered that the respondent ought to make a contribution to the IFoA’s costs of £12, 500 inclusive of VAT. A copy of the full determination can be found at bit.ly/1OgDqKy
June 2016 • THE ACTUARY 11 www.theactuary.com
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