Lloyd's warns insurers to face the challenges of climate change
The insurance industry must face up to the growing threat of climate change or risk being swept away, according to Lloyd's, the world's leading specialist insurance market.
A new report, ‘Climate Change, Adapt or Bust’, published today by Lloyd’s, warns that insurers must act now to understand and actively manage risks from emerging threats such as greenhouse gases and rising sea levels. With recent scientific evidence suggesting that climate change is happening faster than previously thought, investment in research and a change in industry behaviour is long overdue.
Key findings of the report include:
recent natural disasters have revealed the inadequacy of capital and pricing models, so catastrophe models must be updated regularly to keep pace with the latest scientific evidence;
the industry must take a new approach to underwriting, looking ahead and factoring in climate change scenarios, rather than simply basing decisions on historical records – especially with extreme windstorm seasons set to continue;
insurers must prepare for the impact of climate change on asset values. Underwriting for profit will be crucial;
insurers must regularly review and communicate conditions of coverage in light of the impact of climate change; and
effective partnership with business and government will be key to mitigating risk.
Rolf Tolle, Lloyd’s Director, Franchise Performance said:
“Although it’s almost two decades since the UN recognised that climate
change was a catastrophic threat to earth, it’s clear that the insurance industry
has not taken catastrophe trends seriously enough. As an industry we must
work together to understand and manage these new risks, and to change our
“Today’s risk environment is changing and evolving – more rapidly than ever
before. So at Lloyd’s, understanding and anticipating major risk trends is at the
heart of all we do.
“Climate change is today’s problem, not tomorrow’s. If we don’t take action now
to understand the changing nature of our planet and its impact, we will face
The report marks the launch of Lloyd’s 360 Risk Project which aims to generate debate about today’s key risk issues and how best to manage them.
Issues raised in the report will be debated at a session on the 5 July at Lloyd’s. The panel session, chaired by Sir Trevor McDonald will explore the key issues surrounding climate change and its impact on the insurance industry and the wider business world. Joining him will be business leaders and risk experts, including Thierry Desmarest, CEO of Total, Bob Hartwig, Chief Economist of the Insurance Information Institute, Wyn Jones OBE, Managing Director, Alcan UK; John Eliasch, Chairman, Head; and Lord Levene, Chairman of Lloyd's.
1. 'Climate Change: Adapt or Bust’ is available at www.lloyds.com/360
2. This is the first in a series of reports to be issued by Lloyd’s as part of the 360 Risk Project. Forthcoming reports will cover managing the cycle in the face of rising catastrophe trends, and surviving the hurricane season.
3. The Lloyd’s 360 Risk Project aims to generate discussion and debate on how best to manage risk in today’s business environment. By tapping into the concentrated expertise and knowledge within the Lloyd’s market – and bringing together the views of experts from the insurance industry and the wider business, political and academic worlds – it will build a focus for practical, thought-provoking discussion about the issues that matter. Lloyd’s 360 Risk Project will not deliver all the answers. But ten years from now the world will likely be a riskier place. To manage new and emerging risks to the best of our ability, industry needs to work together better, and act now. Lloyd’s 360 Risk Project is designed to make a difference, and to help that process.
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