PRESS RELEASE
24 October 2024
How the insurance industry can help the global economy transition towards a more sustainable future
- Wide ranging research commissioned by the LMA highlights the stress on the sector caused by climate change
- Insurance is a critical enabler in the transition and without it businesses will struggle to achieve their carbon reduction goals
London, 24 October 2024: With the next COP meeting fast approaching, the Lloyd’s Market Association (LMA) commissioned report, Underwriting the Transition, is a timely reminder of how important the insurance industry is in ensuring that the ambitious goals of the Paris Agreement in 2015 to achieve a low-carbon economy are met. The report is the first of its kind to examine the evolving challenges, risks and rewards posed by the transition and the implications for the insurance sector over the next 20 years in such a holistic and comprehensive way.
On the LMA’s behalf, KPMG has looked at the impact of low-carbon transition across eight economic sectors important for the Lloyd’s market, mapping out potential decarbonisation pathways. This is based upon KPMG’s extensive expertise in these sectors as well as interviews with Lloyd’s underwriters. The report details the potential abatement levers that could drive emissions reduction between a ‘business as usual’ scenario and a 1.5⁰C reduction in line with the Paris Agreement.
Paul Davenport, Finance & Risk Director at the LMA, said: “As the leading global marketplace for complex and specialty insurance, Lloyd’s is a centre of deep expertise, product innovation and capital. The 55 managing agents who are members of the LMA are already playing a pivotal role in supporting key sectors as they transition, but to maintain this leadership, they need clear insight into the strategic, operational, regulatory and financial risks that must be managed.”
Roger Jackson, KPMG’s Global Insurance ESG Lead who led the team doing the research, said: “Now, more than ever, insurance is needed to support the transition to a low-carbon economy. This report seeks to provide a common viewpoint across the transition sectors that are also key to Lloyd’s underwriters. In doing so, it provides deeper insights into the opportunities and risks from transition for underwriters, which supports the insurance recommendations in the recently published ‘Scaling Transition Finance’ report by the Transition Finance Market Review.”
A ’silent’ transition
The report highlights that transition is already happening around us. Businesses are already adapting to new types of transportation, moving towards renewable energy sources and using low-carbon materials in construction. It is no longer something in the future.
This ‘silent’ transition and the data/information challenges it poses, brings a risk of misalignment in terms of product and pricing if these risks are unknown or misunderstood. Insurers are undoubtedly already insuring the transition and so will benefit from a closer examination of how risks are changing, as well as, more importantly, the opportunities available to engage with insureds to become more relevant than ever.
Paul added: “The insurance industry, traditionally viewed through the lens of risk management and protection, is a critical partner in this transition. Without insurance, businesses will struggle to achieve their transition goals or build resilience against the impacts of a changing climate.”
Roger added: “It’s only by understanding companies’ transition pathways in more detail that insurers will really be able to assist, and in doing so realise the opportunities, as well as risks, of transition.”
Paul concluded: “There is clearly more work to be done in this complex and evolving area and it is something that the LMA and KPMG would like to address again in the future to monitor what shifts occur in government policies, regulation and in the portfolios and risk profiles of market participants.”
- ENDS -
About the report
Underwriting the Transition is a timely reminder of how important the insurance industry is in ensuring that the ambitious goals of the Paris Agreement in 2015 to achieve a low-carbon economy are met. The report is the first of its kind to examine the evolving challenges, risks and rewards posed by the transition and the implications for the insurance sector over the next 20 years in such a holistic and comprehensive way.
On the LMA’s behalf, KPMG has looked at the impact of low-carbon transition across eight economic sectors important for the Lloyd’s market, mapping out a potential decarbonisation pathway. This is based upon KPMG’s extensive expertise in these sectors as well as interviews with Lloyd’s underwriters. The report details potential abatement levers that could drive emissions reduction between a ‘business as usual’ scenario and a 1.5⁰C reduction in line with the Paris Agreement.
Notes to Editors
Media relations contacts
LMA:
Carole Porter, Head of Marketing and Communications | +44 20 3307 3947 | Email: carole.porter@lmalloyds.com
Omnia Partners:
Will White, Director | +44 777 155 549 | Email: will.white@weareomniapartners.com
About the Lloyd’s Market Association (LMA)
The Lloyd's Market Association (LMA) exists at the very heart of Lloyd's, a world-leading global marketplace for complex risk where solutions to challenges are delivered every day. All 55 Lloyd's managing agencies, with a total market stamp capacity of approximately £52.6bn in 2024, and all Lloyd's members' agents, are members of the LMA.
We represent our members' interests to organisations including governments, regulators, and the market's central supporting body, the Corporation of Lloyd's. We provide professional and technical expertise in areas ranging from model policy wordings to the implementation of innovative technologies. We connect with our members to identify and resolve issues facing the market, and work in partnership with Lloyd's and the other market associations to influence initiatives and outcomes. We operate the market's most comprehensive technical education service, the LMA Academy. For more information visit: www.lmalloyds.com.
About KPMG
KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 18,000 partners and staff. The UK firm recorded a revenue of £2.96 billion in the year ended 30 September 2023.
KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 273,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.