Industry must collaborate to tackle ‘unique conundrum’ of climate change: Carnegie-Brown

Climate change poses a sufficiently “complex and far-reaching” threat to merit broad-based collaboration throughout the insurance industry and beyond to ensure a comprehensive and well-aligned corporate response, the chairman of the insurance market Lloyd’s of London, Bruce Carnegie-Brown, said in opening remarks to the SIRC on Monday.

“Climate risk poses a unique conundrum,” Carnegie-Brown told delegates, while launching a plea for complex and coordinated action within the industry. “It hits both sides of every coin.”

He stressed a long list of signs that climate change is well under way and will have palpable impacts at every level of society.

But he doubled down with the warning that unknown unknowns are also lurking and may require action not yet conceivable. For insurers, climate change bears threats “both present and prospective, both real and yet to materialise.”

Unrestrained, the consequences of climate change could hit insurers with unprecedented damage from all sides. “The climate challenge poses a series of multi-faceted risks: it is present and prospective, moral and financial, macro and micro, near and far,” Carnegie-Brown argued in his plea to the industry. “The plans we make must therefore be multi-faceted and fully integrated throughout our companies.

“Anything less than a comprehensive organisation-wide roadmap facilitating an urgent transition while ensuring long-term prosperity will fail to address the scale and scope of the challenge while demonstrating to our stakeholders that we take this seriously,” he said.

Cast a wide net

Lloyd’s has its own net zero carbon emissions pledges in place, Carnegie-Brown noted. Its London headquarters will be net zero by 2025, while the central fund of $4.5 billion will begin its transition by starting to exclude some high-carbon investments as it targets net zero by 2050 “or sooner”.

Participants in the Lloyd’s marketplace will find themselves pushed into compliance with the 2050 target “further out,” he said.

Mid-term milestones are to be expected “to assure steady progress” and to show adaptability to the problem as it develops “both material threats and those yet to come,” he said.

But he suggested some caution. “We do not believe in a panic dash to the door,” Carnegie-Brown said. “Lloyd’s wants to support its customers in the transition and avoid triggering the secondary indirect impacts that have the potential to paralyse the world’s economy.

“However, we need to see evidence that firms are forming these plans and giving the issue the urgent attention it requires,” he said. Environmental, social and corporate governance (ESG) frameworks and reporting regimes will be central to the “expectation of urgent and pragmatic action.”

Carnegie-Brown praised industry efforts including the Sustainable Market Initiative, the recently launched Asian Renewable Energy Consortium and Singapore’s own Green Finance Action Plan. He said such initiatives represent collaboration between public policymakers and businesses while also leveraging R&D units and insurtechs tasked with finding ‘green’ solutions.

“I encourage you to cast the net wide to increase the likelihood of finding the right solution,” Carnegie-Brown called out to delegates. “Collaboration within defined spaces will be essential.”

The Asia-Pacific region may be to the fore on all fronts: leading in insurance market growth, economic growth, and green innovation, as well as climate change vulnerabilities, Carnegie-Brown noted.

“Asia-Pacific is the undisputed growth engine of the global non-life insurance market,” he said, at half a trillion dollars in annual premium and with a growing middle class and rising standards of living set to close penetration gaps “as people invest in insurance to protect things they love and build their confidence in the future”.

“We believe there is an opportunity for Asia and the Pacific to take the lead in developing green solutions and the making of a powerful incubator with the level of innovation, knowledge and smart policy already present in the region,” he said.