Insurance ‘Central to our Climate Security’ Says Lloyd’s CEO

Lloyd’s CEO Richard Ward, speaking at an ancillary meeting of the Copenhagen Conference on Climate Change, stressed that, although “this is a side event to the main negotiations,’ It shouldn’t “disguise the fact that insurance is central to our climate security.”

Ward said that speeches were not enough, and the time has now arrived for more “meaningful action” to be taken. He pointed out that discussions have been going on “since the early 1990s.” But during that time, “the world’s climate has not paused politely, waiting for the right convention, or treaty. The ice caps continue to melt, weather systems continue to change. The world is a hotter, thirstier place.”

He also noted that while the problem may be a new one for many countries and organizations, it is second nature for the insurance industry. “Insurers have dealt with the impact of extreme weather for centuries,” he continued. “Mopping up the aftermaths of a hurricane or cyclone is second nature to us. Above all, we understand people’s attitudes to risk and – on a daily basis – advise them on how to reduce their vulnerability.”

He singled out four major areas where efforts should be focused, which he identified as follows:
— First, how insurance can encourage people to take positive action.
— Second, how the industry can use its power as an investor and share its expertise on risk.
— Third, the challenge of how to reduce climate risks in the developing world.
— Fourth, what the industry expects from the international community.

Concerning the first point, Ward noted that the industry has introduced a number of initiatives aimed at supporting renewable energy and changing energy use patterns. He singled out projects undertaken by Lloyd’s, Aon, AIG, Fireman’s Fund and AXA for the programs they have initiated to promote the reduction of carbon emissions.

Ward the tackled a thorny issue – how to encourage construction upgrading, particularly after a loss event, without pricing coverage too high or running afoul of legal restrictions on price fixing. His solution: “We are asking policymakers to regulate. To impose regulations on us which require rebuilding to be climate conscious. If regulation levels the playing field, we are confident that we will see real results. Without it, I fear we will only see marginal change from well-meaning policyholders.”

He also stressed the power the insurance industry has from an investment level to direct funds into climate worthy projects. Ward noted that Swiss Re had made a direct investment of €329 million [$485 million] in “clean energy technology companies,” and that “Munich Re’s investments must meet certain sustainability criteria. They will only invest in firms which already meet high climate standards.”

The necessity for cooperation between governments and the insurance industry is a necessity if positive measures are to be adopted, Ward stressed throughout his speech. The insurance industry is at the forefront of those efforts. “In 2007, around 40 British insurance companies – including Lloyd’s – joined together to launch the ClimateWise Principles,” he stated. “I would recommend you get hold of our ClimateWise statement for Copenhagen.”

In summary Ward repeated his call for “more help from policymakers,” in order to help the insurance industry to continue to play “an important role.” He noted that the industry can “offer products which lead to sustainable re-building,” and can use its investments “to encourage other companies to mitigate climate change. We can share our research with policymakers and we can extend insurance to the developing world.”

However, the industry needs “policymakers to set clear goals,” Ward continued. “There must be no wriggle room for governments or businesses. We need the international community to, finally, act in complete unison. Regulation must be one level playing field across the globe. The insurance industry is beginning to come together, across different nations and different fields. The international community must do the same. This is truly a case of divided we stand, divided we fall.”
The complete text of Richard Ward’s remarks may be obtained on the Lloyd’s web site at: www.lloyds.com.

Source: Lloyd’s of London

Topics Legislation Excess Surplus Market Lloyd's