- Support and undertake research on climate change to inform our business strategies and help to protect our customers’ and other stakeholders’ interests.
- Support more accurate national and regional forecasting of future weather and
- catastrophe patterns affected by changes in the earth’s climate.
- Use research and improve data quality to inform levels of pricing, capital and reserves to match changing risks.
- Evaluate the risks associated with new technologies for tackling climate change so that new insurance products can be considered in parallel with technological developments.
- Share our research with scientists, society, business, governments and NGOs through an appropriate forum.
How is Lloyd’s taking action and leading in risk analysis?:
As part of Lloyd’s 360 Risk Project, created to generate discussion on how best to manage risk in today’s business environment, Lloyd’s has produced several research reports on the impact of climate change.
The report “Adapt or Bust” published in June 2006 addresses the issues and impact of climate change and the steps the insurance industry might take to prepare for the increasing volatility of the climate. The report stresses the need for the insurance industry to do more now to understand and actively manage climate change risk and the importance of an effective partnership between business and government. The report also recognises the need for insurers to work with policymakers and policyholders.
The Lloyd’s Report entitled "What Next on Climate Change" was produced last October following our successful 360 Live Debate that summer. As well as identifying some of the key themes raised at the debate, such as the need for each of us to take ownership and personal responsibility for climate change and need for longer term strategies, the report provides an update on how Lloyd’s is addressing the issues of climate change.
Building on its previous work and working with leading climate change scientists, Lloyd’s produced a report entitled “Rapid Climate Change”. This report explores what climate change could mean in our lifetime in four areas of particular concern to the insurance industry; sea level rise, melting ice caps, flood and drought. The reports also highlighted the fact that regional change can be more extreme than global averages. The report urged insurers and business to take climate change into account when modelling, formulating strategy, and setting premium rates and capital requirements.
Lloyd’s is also funding a PhD research post with the London School of Economics, which will investigate the role of global climate modelling in business decision-making. Lloyd’s is also creating a second PhD post on a similar theme jointly funded by Lloyd’s and the Engineering and Physical Sciences Research Council.
In addition, Lloyd’s recently supported the Met Office with the launch of their new hurricane prediction methodology by hosting the launch event in the Old Library at Lloyd’s in front of a capacity audience of underwriters, actuaries and catastrophe modellers.
The Met Office method uses numerical climate model output to predict how many storms will be generated in a given season. This is different to the current statistically based models and adds a useful additional perspective. This is a significant step forward and Lloyd's is delighted to have supported the launch.
The accuracy of this prediction method will only become apparent over a number of seasons but already it correctly predicted the low activity of 2006 season in contrast to the high activity forecast by most statistically based models.
Lloyd’s insurer Ascot Underwriting has also established a renewable energy operation, Renewco Underwriting, which will offer onshore and offshore coverage for power generation facilities in the solar, wave, tidal, wind, biomass, geothermal and small hydroelectric fields.
