New York 360 with NATO event welcome speech

Ladies and gentlemen,

Good morning and welcome to this 360 debate which Lloyd’s are hosting with NATO. The purpose of our 360 events is to generate discussion and find practical solutions to emerging risks faced by businesses. I am delighted to see so many people here today, ready to share their views and insights on three of the biggest challenges the world faces now: climate security, piracy and cyber threats.

For too many people across the world, these issues seem insurmountable. The world seems strange and unfamiliar, a place where Navy SEALs are dispatched to hunt down Somali pirates; where North American forests can be brought down by beetles, thriving in shorter, warmer winters[i]. A place where Bank of America ATMs can be disabled through a computer virus.

I believe these risks are not insurmountable. I believe they can be faced. And I believe that the businesses and governments that seize the challenge, get involved and find solutions will rise to the top.

It makes sense to have this conversation here in North America, Lloyd’s biggest market, where we have a long history of protecting and supporting US property and business. But that isn’t the sole reason we are here in New York today. The US is the home of enterprise, innovation and a can–do spirit. It is a place where solutions trade at a higher value than problems. The city that never sleeps won’t allow itself to be outpaced by any risk.

Today’s America has more scientific, technological and political power than any previous generation in any nation. And we must use all of that power and skill to meet today’s risks.

Your President, speaking to the UN just a few blocks from here called for an end to “a status quo that has allowed us to be defined by our differences and outpaced by our problems”[ii]. Luckily for us, in the globalised era, we are able to form new alliances to fight our common threats. A joint Lloyd’s–NATO seminar simply would not have happened twenty, even ten years ago. Now, forming new coalitions is an essential part of risk management.

I don’t want to spend too long today setting out what these risks are, and how they are affecting us. I think we all know that. We want a focus on solutions. How to match the speed at which today’s threats travel. How to unravel the complexity of some of these risks and how to build more effective coalitions for action.

Speed

To take my first point, speed. We are playing catch-up. If Piracy were an industry, we would all have to admire its growth rate; attacks have risen from 104 in the first quarter of 2009, to 136 in the second. Cyber crime is also growing fast, quite literally, an attack now takes place every ten seconds. The Catlin Arctic Survey published new results just last month, bringing forward the date when the summer sea ice will be completely gone, to ten to twenty years from now[iii]. Pen Hadow, the Arctic explorer who lead the expedition, will speak to you later on this subject.

The ice will keep melting. The criminals who use software as weapons are not going to slow down the pace. Hackers famously stole – at a conservative estimate – the credit card records of 45 million TJ Maxx customers and this sort of hack, is I believe, considered pretty easy nowadays[iv]. Our prognosis isn’t particularly encouraging on piracy either. There are many millions of young men in failing states no doubt reading about the Somali pirates with envy and a desire to emulate.

So we need to speed up our response. This calls for a combination of visionary policies – thinking the unthinkable – and pragmatism, finding ways to mitigate and adjust to a new reality.

On the visionary side of the coin, we need greater investment in research by both business and government. And bold new policies.

A policy of pragmatism means we have to accept the inevitable. That climate change is with us. And it is not going away. So we need to adapt to reduce our vulnerability. There is an old English saying that “prevention is better than cure”. Hurricane Katrina caused over $100 billion in damage. The levees are being rebuilt at a cost of $14 billion[v]. To use an old US expression – you do the math.

Complexity

The second feature we need to tackle is the complexity of these risks. The first knot to untangle is the globalisation of the supply chain, which means that businesses may not realise all the threats they face. Our new report on digital threats provides several examples. I was struck by how two US Navy Ships in the port of San Diego were able to bring down mobile phone networks and even a hospital paging system. The problem was that GPS signals are vulnerable to “jamming” – making a signal unreadable through noise levels or interference . The scale of mapping out the implications of a complex supply chain can seem daunting but, as your President has remarked “Unease is no excuse for inaction”.

Many risks today are viewed primarily as scientific or technological, so they are left to the backroom boys in R&D. Do leaders understand the risks, especially digital risks, well enough to control them? We want to see risk move from the backroom to the boardroom.

Many would argue that the Somali pirates are not a complex threat. Their business plan seems so simple: a small boat, a sub machine gun and a nothing to lose attitude.

If it’s this simple, why can’t we solve it?

The fact is that pirates fear being robbed for their ill gotten gains back in Somalia far more than they do the high tech battleships in the Gulf of Aden. Possibly because the militaries on patrol can find themselves with no option but to release captured pirates back into their community of thieves. We need to find permanent legal, political and military solutions to ensure that piracy isn’t seen as a route to easy wealth in Somalia or any other failing state.

Climate change is the ultimate symbol of interdependence. We will all be affected. Natives of some small, low lying islands are already finding themselves climate refugees. A sobering thought on Manhattan, another small, low lying island. Hurricanes could creep up the Eastern Seaboard and surge waters could flood into the subway, the Lincoln Tunnel and submerge all three of New York’s airports, lying at an elevation of less than ten feet above sea level[vi].

But if people are starting to believe climate change as a concept, they are not yet changing their behaviour. I suspect that some people don’t adapt their properties to extreme weather or flood, because they think that insurance will pick up the tab. This short term thinking is wrong.

If people want to build a home or factory on a fault line or a flood plain, insurance should cost them more. If they adapt their property to mitigate the danger, it should cost them less.

Coalitions

The third new feature of today’s risks is the need to build coalitions. Lloyd’s alone can’t bring the rule of law to Somalia. We can’t cut global emissions. But these things are not beyond the limits of collective action.

The TJ Maxx ring of hackers were a highly globalised coalition including three Americans, three Ukrainians, two Chinese, an Estonian, and a Belarussian.

If the bad guys can do it, so must we. A big test is coming up at the Copenhagen climate change summit in December. Europe is excited by the prospect of US engagement. You remain the world’s only superpower. You are critical to any solution and you are also vulnerable to the failure to find solutions. Who will pick up the tab for policing new conflicts over scarce water or agricultural land? Who ships millions of goods through the Gulf of Aden every year? Where is Silicon Valley?

In today’s world, for the moment, all roads lead to America.

Our aim today is to bring a range of very different voices to the table, in the hope that this will give us perspective. Today, you will hear from sailors and explorers and from academics and lawyers.

Because we will only get the full picture if we all share our insights.

In 2009, we have no excuse not to do this. If the 19^th century was the era of the nation state, and the 20^th century the era of multilateralism, the 21^st century will be more pluralistic. No-one has a monopoly of power anymore. The digital goliaths of Silicon Valley and the sober suited government men and women from Capitol Hill must work together.

Welcomes

Ladies and gentlemen,

Our challenge today is to find solutions to tackle the speed of today’s risks, their complexity, but above all, to find new, unusual coalitions to address today’s risks.

This event today is a start. It brings together Lloyd’s and NATO, an insurer and a defence organisation who share an interest in risk management. Our panellists are distinguished men and women from many different worlds - law, business, insurance and academia to name a few.

I am also very glad to welcome a variety of keynote speakers. Pen Hadow, an explorer, who has just returned from leading the Catlin Arctic Survey and will talk to you about climate security. Mike Liebowitz, who has had less far to travel, he is Director of Risk Management at New York University. And I am delighted to introduce not one – but two - Italian Admirals as keynote speakers. Admiral Luciano Zappata is NATO’s Deputy Supreme Allied Commander. Before he took up his current post, the Admiral served on the frigates, destroyers and submarines of the Italian Navy. He is now based in Norfolk, Virginia and has recently worked on NATO’s Multiple Futures project considering issues as diverse as cyber war and the High North. Vice Admiral Gemignani spent many years as a Submariner and is now at a NATO Command, a little closer to his native Tuscany, in Naples, where he is central to NATO’s efforts to deter piracy in the Gulf of Aden.

Ladies and Gentlemen,

I can think of no-one better than Diane Brady to preside over this diverse group of people. You may know her from her frequent guest appearances on CNN and CNBC. But I know that her career spans Business Week, the Wall Street Journal and working for the UN in Kenya.

Diane, over to you!