Climate change could provide an opportunity for growth in the re/insurance industry — but only if pricing levels keep pace with increasing risk levels.

That is the view of Barney Schauble, managing principal of Bermuda-based investment fund Nephila Capital Ltd.

Mr. Schauble's firm specialises in insurance-linked securities such as catastrophe bonds, normally tied to specific risks, such as a Japanese typhoon or a California earthquake, and offering an attractive rate of return.

Speaking on a climate change panel on the second day of the World Insurance Forum, Mr. Schauble said: "Climate change could be a major driver for growth in the insurance and reinsurance industry, but only if prices change to reflect the changing risk.

"Over the long term, it presents more of an opportunity than a threat."

Kyle Danish, a partner with US law firm Van Ness Feldman who specialises in climate change and environmental law, saw a serious threat for insurers if climate change had the impact on the weather that is being widely predicted.

"If you really get a series of major events, then this industry would be peculiarly exposed," Mr. Danish said.

Moderator Michael Butt, chairman of Bermuda re/insurer Axis Capital Holdings Ltd., said that as the industry's exposures to catastrophes tended to be short-term, it should be able to add capital and maintain profitability, as climate change took effect over time. "The long-term issues are more serious," he added.

Professor Peter Hoeppe, head of geographical risks research at Munich Re, said: "Going to a carbon-free economy is something we have to do anyway — we're running out of oil. We should focus not on the problem, but the solution."

To that end, he said his company planned to invest 2.5 billion euros in renewable energy projects. These include a scheme to generate electricity from banks of solar panels in the North African desert. Solar panels covering just one percent of the North African desert would generate enough electricity to meet global needs, Mr. Hoeppe said. A company called the Desertec Foundation, founded in conjunction with Munich Re, has been set up to take the idea of desert energy worldwide.

Within three years, Desertec hopes to have established a mechanism for making safe investments in the project. By 2050, it is hoped the African solar plants will be able to provide 15 percent of Europe's electricity. The first power is expected to be generated in 10 to 15 years. Litigation is another aspect of climate change that insurers will have to consider. Mr. Danish said three particular cases had already been filed in the US, any one of which could lead to "door-opening precedents".

One relates to the town of Kivalina, Alaska, which is falling into the ocean and is suing a long list of companies who use fossil fuels heavily. The state of Connecticut is suing the five biggest electricity producers in the US, not for financial damages, but rather for injunctive relief, as its environment suffers from the impact of climate change. Another lawsuit accuses oil companies and intensive energy using companies of being responsible for Hurricane Katrina. Whether any of these cases would go through the courts was uncertain, but Mr. Danish warned: "The potential is enormous. I mean, what is the potential payout for Katrina?"

Industry was looking for clarity through new federal legislation to make clear where there was tort liability, he added.

Rolf Tolle, former franchise performance director at Lloyd's, added that a UN report had put a $2.2 trillion price tag on environmental damage caused by the world's 3,000 biggest companies, an estimate that would provide a push to litigation. He added that the industry had to find a unified voice to project its views on the climate change debate.