As climate change and geopolitical risks overlap, Lloyd's has released a new report to help insurers and risks managers deal with these issues.
The second Lloyd’s “Shifting Powers” report, created in partnership with the Cambridge Centre for Risk Studies, uses potential but plausible scenarios to identify geopolitical risks associated with climate change, and it outlines initiatives already underway. It also highlights insurers' role in easing geopolitical climate tensions by providing valuable insight in projects such as the Australia-Asia Power Link, which aims to connect regions through sustainable energy sources.
Moreover, the report assesses global political developments in the coming century and risk changes resulting from various outcomes of the global energy transition process. Finally, it highlights how breakthroughs in renewable energy storage and technology are significant in global business and symbols of influential partnerships between nations.
Andrew Coburn, chief scientist at the University of Cambridge's Centre for Risk Studies, described climate change as the greatest emerging risk of our generation.
Commenting on the partnership with Lloyd's, Coburn said: “Cambridge Centre for Risk Studies has been privileged to work with Lloyd’s to research the social and geopolitical threats that could result from different pathways. This work is ground-breaking in pushing for creative thinking surrounding broader climate risks to the global system and how the risk management community and insurance industry can make our society safer as we embark on energy transition.”
The report complements Lloyd's’ efforts in the Insurance Task Force of His Royal Highness the Prince of Wales's Sustainable Markets initiative and its commitments to the UN-convened Net Zero Insurance Alliance (NZIA) to transitioning all of its operational and attributable greenhouse gas emissions to net-zero by 2050 at the latest.
It suggests ways for insurers to ease tensions between national power blocs by providing risk solutions for regional energy and agricultural projects that can bind the international community together.
Lloyd's chairman Bruce Carnegie-Brown said the insurance industry has a key role in insuring the transition to a more sustainable world as geopolitical risks and tensions between international communities make addressing climate change more complex.
“We know businesses are looking to global leaders and diplomatic agreements for the pathway forward, but we are also acutely aware that businesses have a responsibility to play a leading role in the transition,” Carnegie-Brown added. “We are using Lloyd's convening power to collaborate with our partners globally and create insurance products that will enable a more sustainable world.”