Lloyd’s chairman John Nelson has listed a new food security risk relating to New Zealand as one of the most salient emerging risks in a Wall Street Journal
Nelson said the subject was paramount to governments and cited China as a good example where two issues the government faces are corruption and food security.
“A lot of their milk was coming in from New Zealand, so New Zealand producers are starting to develop their own dairy farms in China, which creates interesting risks because they are in a sense managed from New Zealand,” he said.
Other ‘unknown unknowns’ Lloyd’s was looking at, he said in the article, were autonomous vehicles and drones.
He went on: “One of the things we focus on very much is the increased concentration of urbanisation worldwide, which shows no signs of abating.
“That will change the risk landscape and create unknown unknowns, with every kind of risk you can think of.”
He also said while it was a fact that many of the biggest risks on the agenda of corporate managers were uninsurable, the industry could step in.
“For some risks, self-help, risk avoidance, is the best answer. A good example of that would be reputation. I don’t think it’s possible to insure all aspects of reputational risk.
“On the other hand, there is a whole slew of new risks and the insurance industry probably needs to be a bit more forward thinking.”
Nelson said Lloyd’s had set the tone for insurance on political risk and terrorism, following a growth in demand for it, with most big organisations now insuring for it as a matter of course.
“We provide coverage for it. Obviously that’s a good example of a good business opportunity and because we have the best collection of underwriting skills in the world we are in a position to provide coverage others do not,” he told The Wall Street Journal
The recent earthquake in Nepal had underlined the importance of Lloyd’s increasing its footprint in growth countries such as China, India, Mexico and Brazil.
“As these countries industrialize they are creating all sorts of risks and many are also susceptible to natural disasters,” he said. “Most of these countries are seriously underinsured and all have policies to increase insurance penetration because of what happens in the aftermath of catastrophe.
“After the Christchurch earthquake, for example, New Zealand hardly skipped a beat because the insurance industry pumped capital straight in.
“By contrast, Haiti is still a basket case and I worry about the tragic situation in Nepal at the moment, because I suspect the level of insurance penetration is quite low.
“We think that over the next five years the addressable market for Lloyd’s will triple to US$2 trillion from about US$600 billion presently.”
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