The London market’s insurers and brokers must harness their powers of innovation to help achieve net-zero greenhouse gas emissions, said the CEO of the London & International Insurance Brokers’ Association (LIIBA).
Speaking online to members of the US-based Association of Lloyd’s Brokers, LIIBA chief executive Christopher Croft said that London’s brokers and insurers must innovate in a manner similar to that when the first motor insurance policy was written over 100 years ago.
Croft (pictured above) said that the journey to net zero will not simply be a matter of adaption for brokers, but instead will mean doing things differently and embracing new technologies. However, he also said that the need for innovation means that regulators should be less demanding in their requirements for data because, in some cases, that data will not exist.
“These days, insurance is the study of sizeable amounts of historic performance data,” Croft said. “We simply won’t have that here but we need to find a way not to let that get in the path of progress. The need for vast amounts of data to support underwriting decisions is driven by the attitudes of our regulators. So, if we are to be the bedrock of net zero that those same regulators are telling us we have to be, then they must play their part. They will have to discover the flexibility and adaptability necessary to allow them to adjust their approach to ensure markets can be formed around the necessary new products.”
Croft said that HM Treasury is now reviewing the UK’s regulatory framework, and data was one key issue that was flagged during consultation.
Croft also spoke of the parallel between the development of motor insurance and the creation of insurance products to address climate change.
“I am reminded that, when the first motor insurance policies were being drafted as the nineteenth century turned to twentieth, the approved Lloyd’s wording for defining an automobile was ‘a ship that sails on land’,” he said. “We may need to achieve similar levels of innovative thinking to meet the challenges of insuring this new wave of disruptive technology. Already, I have sat in on discussions about electronic ferries and electronic airliners. If these as yet relatively untested new inventions are to come into commercial use in time for 2050, we will need to find innovative ways of insuring the risks inherent in that.”
Another major challenge for the London insurance market, Croft said, will be measuring and tracking progress towards net zero.
“Insurance brokers will be at the heart of developing ways for their clients to assess their carbon impact. And we will need to do the same ourselves in our firms.”
