As global economies gear up for the upcoming COP meeting, a new report commissioned by the Lloyd’s Market Association (LMA) highlights the vital role of the insurance sector in the transition to a sustainable future. The report, Underwriting the Transition, has revealed the pressures climate change exerts on the insurance industry while outlining the sector’s integral position in facilitating a shift to a low-carbon economy.
The report is the first study to look into how the transition to sustainability will affect the insurance industry over the next two decades. It explores the challenges, risks, and opportunities insurers face in key economic sectors, based on in-depth analysis by KPMG. As the insurance industry navigates these developments, its capacity to enable carbon reduction initiatives will be critical.
“As the leading global marketplace for complex and specialty insurance, Lloyd’s is a centre of deep expertise, product innovation and capital,” said Paul Davenport, finance and risk director at the LMA. “The 55 managing agents who are members of the LMA are already playing a pivotal role in supporting key sectors as they transition, but to maintain this leadership, they need clear insight into the strategic, operational, regulatory and financial risks that must be managed.”
The study focuses on eight economic sectors crucial to the Lloyd’s market, mapping potential decarbonisation strategies. This includes emissions-reduction approaches in scenarios ranging from “business as usual” to ambitious goals aligned with the Paris Agreement’s 1.5°C target.
Roger Jackson, KPMG’s global insurance ESG lead, emphasised that insurance is indispensable to the transition, noting: “This report seeks to provide a common viewpoint across the transition sectors that are also key to Lloyd’s underwriters.”
One of the report’s key findings is that businesses across industries are already undergoing a “silent” transition, adopting cleaner technologies, renewable energy, and low-carbon materials. However, the lack of clear data poses risks for insurers in terms of pricing and product alignment. Better understanding of these shifts will be central in enabling insurers to support clients while maintaining relevant offerings.
Davenport highlighted the significance of this alignment, stating, “Without insurance, businesses will struggle to achieve their transition goals or build resilience against the impacts of a changing climate.” He added that there is still much work to be done as this landscape continues to evolve.
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