The energy transition is reshaping entire industries, from transportation and energy to construction and commercial real estate. These sectors are facing substantial changes in risk profiles as they distance themselves from fossil fuels and adopt low-carbon technologies.
As the global insurance industry rises to the challenge of underwriting these risks, brokers must step into a more strategic role and act as catalysts for long-term, collaborative relationships between insurers and their clients, according to the Lloyd’s Market Association (LMA).
Speaking on behalf of the market, Paul Davenport (pictured), finance and risk director at LMA, emphasized the need for innovative insurance structures to accommodate the intricate risks associated with net-zero projects.
“Brokers are critical in helping underwriters understand their clients’ transition pathways,” said Davenport. “They’re in the best position to translate a client’s sustainability journey into meaningful, actionable insight for insurers, and that kind of clarity is what will drive better underwriting, better products, and ultimately a smoother transition.”
The LMA is a trade association that represents the interests of all 55 managing agencies and members' agents operating within Lloyd's of London.
The group provides professional and technical support to these underwriting businesses within Lloyd’s, including model policy wordings and technology adoption. It also works with the Corporation of Lloyd's and other market associations to identify and resolve issues.
A central concern for the LMA in the context of the energy transition is the short-termism that often dominates insurance relationships, particularly the routine, transactional nature of annual policy renewals.
This structure, according to Davenport, is misaligned with the long timelines required for businesses to decarbonize and adapt to climate-related regulatory and technological changes.
“In some ways, the traditional annual policy renewal model works against the transition process,” Davenport said. “Insurers think: ‘If the risk changes, I’ll reprice next year.’ Clients think: ‘If I don’t get the coverage I want, I’ll shop around next year.’
“That mindset pushes important conversations down the road. Instead, we need to look three to five years out and ask: how will risks change, and what kind of insurance coverage will be needed?”
The LMA is advocating for a shift toward multi-year strategic engagement, where brokers, insurers, and clients work collaboratively on long-term risk planning and innovation. This approach would also better align with the realities of emerging risks and technologies that do not yet have robust historical data to inform actuarial pricing models.
One of the biggest hurdles in aligning underwriting with transition goals is a lack of standardized, quality data.
Clients may be at different stages of the transition, and the individuals purchasing insurance may not have full visibility of their organization’s decarbonization strategy. That creates a “silent transition,” where changes in risk exposure go unaccounted for in insurance conversations.
To address this, the LMA has developed a standard set of 22 ESG-related questions that brokers can use to collect consistent and comparable data from clients.
The ESG data standard aims to help insurers better understand what types of transition risks clients are exposed to, such as those related to carbon capture, alternative fuels, renewable infrastructure, or emerging liability issues, and enable more innovative and tailored product development.
“From a broker’s perspective, using that standard helps,” said Davenport. “The client only has to answer one set of questions rather than multiple ones from different insurers. That drives more consistent understanding and better adoption across the market.”
Standardized data ultimately helps bridge communication gaps between broker, client and insurer.
“Underwriters only have so much time to devote to each client. So, how do we alleviate that constraint? That’s where standardized, high-quality transition plans come in,” Davenport said. “When there are agreed standards, it becomes easier for insurers to understand a client’s direction, anticipate future risks, and engage more effectively.”
Historically, insurers have played a pivotal role in shaping safer technologies by setting standards and pricing risk accordingly, and a similar dynamic is playing out today. The Lloyd’s market has already begun to respond with products such as parametric insurance and performance guarantees, which can help de-risk unproven technologies and incentivize adoption.
From electric vehicles and hydrogen-powered ships to sustainable aviation fuels and carbon capture technologies, the energy transition presents significant opportunities for insurers willing to innovate.
However, Davenport stressed that insurers need freedom to develop their own strategies and approaches to the net-zero shift.
“(Insurers) have different capital backing from around the world, and they’re writing risks in many different geographies,” he said. “Some of these firms will lean into (sustainability) heavily, actively developing new products to meet evolving client needs. Others may continue supporting traditional energy like oil and gas. Our position is that the market firms need to be free to determine their own risk appetite.”
So, where do brokers fit in this picture? According to Davenport, brokers are best positioned to connect the dots as they not only hold the client relationship but also the insight needed to interpret a client’s business evolution and present it effectively to insurers.
“Brokers can facilitate a new kind of conversation, one that’s not just about risk transfer, but about strategic partnership,” he told Insurance Business.
“They can help establish continuity across renewals, create better alignment around transition timelines, and ensure that all parties are moving forward with shared goals.”
That role will become even more critical as insurers face increasing regulatory pressure to support climate adaptation, develop net-zero pathways, and deal with the rising costs associated with low-carbon assets and transition technologies.
With the energy transition already underway, brokers must play an active, forward-looking role in shaping how the insurance market supports it.
“There’s massive investment going into infrastructure to transition from fossil fuels to a more electrified economy. All of this brings new types of risk, and therefore the need for risk transfer, protection, and resilience,” said Davenport.
“Brokers can play a huge role in enabling long-term thinking and helping create continuity in relationships.”
