Crystal balls are preferred by some over tea leaves; others resort to reading entrails. We all seek some assistance as we peer into the future at the cusp of a new year and a new decade. I am no exception, my divining rod: an imprecise dialog with peers and the ever-probing investigation of Google. So here goes a look at coverage in a world of climate change in 2010.

1. The lead story in this area will have to be a decision in Steadfast Insurance Company v The AES Company. In July 2007 Steadfast brought suit against its insured to ascertain coverage obligations in the climate change lawsuit, Native Village of Kivalina v ExxonMobil Corp. Steadfast moved for summary judgment last March; the motion is fully briefed. A decision should be forthcoming. Regardless of how it comes out (unless there is no decision), the ruling will be significant, if only because it will be the first climate change coverage decision.

2. Will the beach pools continue to avoid disaster? Since Katrina in 2005, United States hurricane seasons have been relatively tame. After predicting an above average season last year, meteorologists had to backtrack and acknowledge a below average season. At some point, the averages will catch up and a Category 5 storm will make landfall here. When that happens we will learn whether the post-loss funding mechanisms will fly, or whether a different legislative fix (even a federal fix) will take over.

3a. New products are the name of the game. Insurance is no different. The Property and Casualty carriers have been rolling out green building coverages focused on certification, re-building upgrades, and recycling. Carbon sequestration projects have found cover. Policies covering carbon credits are less apparent. Expect more innovation, but also expect some re-tooling as the carriers respond to more and better information about what they are insuring, and what insureds want.

3b. Don't take my word on this. Dr. Evan Mills of the Environmental Energy Technologies Division of the Department of Energy has annually and comprehensively assessed insurer responses to climate change. Let's hope there continues to be funding for his important work.

4. The National Association of Insurance Commissioners last March established requirements for insurers to disclose climate change risk. The first disclosures are due on May 1. If past history is any metric, the quality of the disclosures will be all over the map. One can be sure the SEC and state regulators will be paying close attention. The SEC has received numerous petitions seeking the same types of requirements for other industries. State regulators are concerned that climate change threatens the viability of insurers.

5. The Carbon Disclosure Project is on an asymptotic roll. It started slowly in 2003 but since 2006 the CDP has grown at an ever-increasing clip (2204 in 2008, up from 1449 in 2007, which is from 922 in 2006). And it has real heft behind it: "on behalf of 475 institutional investors, holding $55 trillion in assets under management and some 60 purchasing organizations such as Cadbury, PepsiCo and Walmart." The CDP reports annually on corporate climate change statements; its cutoff date for the 2009 report was February 1. Companies wishing to join the ever-increasing number of disclosing entities in 2010 will have to move smartly. (For those pondering the link to insurance, the NAIC rule accepts CDP disclosure.)

6. The climate change risk management dialog will become more sophisticated. Climate change will be a disaster for some; for others it will be a golden annuity. Assessing those risks and opportunities will be key to commercial success. As an example, the cement industry is one of the major identified sources of carbon emissions. Yet if adaptation proceeds, cement is going to be a primary element in the "armoring" of the coast. But does one build in a developing country and export the cement with accompanying political risk and transportation cost, or does one make cement where it will be used. Figuring out the successful business plan will not be simple and risk managers and their consultants will have a lot to keep track of.

7. The absolute carbon dioxide exclusion will remain only theoretical. Insurers will continue to rely on their pollution exclusions to stave off any coverage liability for carbon dioxide claims. Don't expect a different approach until the pollution exclusion gets nicked.

If you've gotten this far, you deserve a holiday (I find this stuff interesting, but many do not). So take tomorrow off. Contemplate the future and then grab it. It is the only one we have.

Best wishes for 2010.

In a bid to give some muscle to United States climate change negotiators in Copenhagen, Senators Kerry, Graham and Lieberman unveiled Thursday a "framework" for a Senate climate change bill. See http://www.scribd.com/doc/23946492/12-10-09-Kerry-Graham-Lieberman-Climate-Framework  The thinking is that U.S. credibility took a big hit when the Kyoto Protocol died in the Senate. This time, any agreement will be informed by the position of the Senate, communicated to the world at large.

So what exactly was this position? The envisioned bill will do the following:

Produce better jobs and cleaner air.

Secure energy independence.

Create regulatory predictability.

Protect consumers.

Encourage nuclear power.

Ensure a future for coal.

Revive American manufacturing by creating jobs.

Create wealth for domestic agriculture and forestry.

Regulate the carbon market.

Does this move the ball forward? I am skeptical. Every one of these subjects will have proponents and opponents who will lobby for their particular interest. To take just two: energy independence and regulatory predictability.

1. Energy independence. If independence were that simple, it would have been figured out sometime in the last four decades since the oil embargos of 1967 and 1973. But instead, America's dependence on foreign oil has only increased. If America is going to be energy independent, that might mean increased use of coal (critics there), or nuclear power (critics there), or ethanol (critics there), or tar sands (critics there). If you read sober scientific assessments of the environmental impact of any nationally meaningful collection of solar arrays, you see literally millions of acres overlain by panels, facilities and conduit (more critics there). In short, everyone (except oil exporters) is for energy independence; the issue is how to get there. The framework offers little to assist in that regard.

2. Regulatory predictability. With California's AB32 and RGGI, the States initiated climate change regulation in this country. Two things were important to States in taking the lead. First, they were able to order climate change regulation in accordance with their priorities, not someone else's. Second, they were able to tap a new source of revenue. The framework (properly I believe) wants to take all that over. Nevertheless, it is exceedingly unlikely that the States will go quietly into the night and just let Uncle Sam do whatever he pleases.

It is trite (but that doesn't make it untrue) to say: the devil is in the details. That is exactly the case with climate change laws and regulations. The framework contains plenty of rhetoric^* but little more than that. What business needs are the new rules of the game. That is the framework that really needs to be published.

^*Speaking of rhetoric, we have a long way to go. The Senators quote Jim Rogers on the need to "ignite" a revolution and put the recession in the "rear-view mirror." Too much ignition and rear-view-mirror-vehicles are what got us into this mess in the first place. Maybe some new metaphors (to go with the new rules) are needed too.