Lloyd’s “360 Risk Project” Conference Tackles Climate Change

July 7, 2006

Lloyd’s new 360 Risk Project is dedicated to examining issues that affect the insurance industry, and its first conference took on today’s most far-reaching and important issue – the debate over climate change, global warming and greenhouse gasses.

In a published report -“Climate Change Adapt or Bust-” issued before the conference, Lloyd’s set the tone for the debate. It acknowledged that the “facts are often confused by politics and by a wealth of different – and sometimes conflicting – evidence from a range of scientific and other sources.” However, the report comes down firmly on the side of those who are convinced that the world’s climate is changing – “and that human activity is playing a major role.” The report stressed that “there could hardly be a debate of greater importance to the insurance industry.”

Although there are no present answers, those at the conference recognized that finding them would require a “global solution.” Lloyd’s noted that “leading industrialists and climate experts have said the fight to stem climate change can only be won by commitment from every country on the planet.”

A bulletin on its Website (www.lloyd’s.com) quotes extensively from remarks made by Thierry Desmarest, Chairman and CEO of the French-based energy group Total. He indicated that those nations which had refused to sign up to the existing Kyoto Agreement on climate change had to be involved in the world’s response to greenhouse gas emissions. “It is vital that when the Kyoto agreement ends in 2012 that any new initiative is one which has the support of every nation.” Three countries that emit the most pollution – the U.S., China and India – have not signed the Protocol.

It’s hard to imagine Desmarest, who heads one of the world’s biggest oil companies, as a closet tree hugger, so when he discussed Total’s policy on emissions it should carry some weight. “We at Total report our emissions levels on a global basis,” he told the conference. “We do not simply produce figures for those countries where regulations demand us to do so. We believe that there needs to be a global standard and regulations for emission levels if we are to take real steps in the fight to reduce the level of greenhouse gases. The European Union has been working to reduce emission but it will count for nothing unless the rest of the world can follow suit.”

Johan Eliasch, Chairman and CEO of sportswear company, Head, backed Desmarest’s call adding there needs to be global standards as the major manufacturers continue to move their operations to India and China where emission limits are not in place. He noted: “It is a problem and we have manufacturing plants in China via a joint venture because it is cost effective. Our staff that oversee the operation will ask out partners what they are doing about reducing emissions, but there’s a feeling that for some countries they are looking to shift the problems to countries where there are no limits.” He also added: “Terrorism, Iran and Iraq are small fry to the devastating effect emissions can have on this planet.”

The 900-pound gorilla in the middle of the debate is of course the U.S. Lloyd’s recognized that “any progress on the reduction of greenhouse gases is doomed to failure without its commitment to change.” Bob Hartwig Senior VP and Chief Economist of the Insurance Information Institute pointed out that while much of the American public expressed concerns over climate change at a local level, there are still those in the country that dismiss it entirely. “The debate in the US is continuing,” he explained. “However, there does not seem to be any indication that any conclusion will be reached any time soon.”

Professor Bill McGuire, Benfield Professor of Geophysical Hazards at the University College London warned there was no good news on climate change. He told the conference that predictions made in 2001 on the likely global rise in temperature by the end of the century were already being revised, with the upper limit of those estimates of slightly under six degrees centigrade (over 10°F) increase now looking to be a realistic result. The resulting impact on the world’s ice glaciers would lead to huge increase in sea levels making tens of millions homeless and impacting on the world’s supply of fresh water.

Lloyd’s Chairman Lord Peter Levene ended the conference stating: “I believe the ideas which have been raised here may well turn into initiatives which will form part of the response to climate change.”

Lloyd’s is to issue a second report which will examine the issue raised by the conference and the potential solutions. It also noted that ” Property insurers paid $86 billion in claims last year alone with the vast majority arising from natural disasters which scientists believe have been exacerbated by climate change. Ten of the hottest years in history have been recorded since 1990.”

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