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Lloyd’s joins the Net-Zero Insurance Alliance and becomes part of the Glasgow Financial Alliance for Net Zero

28 Oct 2021

Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions, has today announced it is joining the UN-convened Net Zero Insurance Alliance (NZIA), further affirming its commitment to cross industry collaboration to mitigate and manage the impacts of climate change and support the speed of the transition to net zero.

In joining the alliance, the Lloyd’s Corporation* commits to transition all of its operational and attributable greenhouse gas emissions to net-zero by 2050, at the latest. It will also set, publish, and report against, interim science-based targets every 5 years to drive near term action (1).

This builds significantly on Lloyd’s commitment to reduce all the operational emissions at its landmark building in London to net zero before 2025 (2), by setting out further substantive actions across two major levers:

1. Transitioning Lloyd’s Central Fund to net zero

The Lloyd’s Central Fund (net assets of £3,019m at HY 2021) provides protection for Lloyd’s customers and the market against severe tail end events. In joining the NZIA, Lloyd’s will transition the Central Fund to net zero by 2050, by redirecting capital flows to green investments that enable and accelerate the transition. Lloyd’s will publish a detailed roadmap to achieve this goal within 12 months, drawing on best practice through the Net Zero Asset Owner Alliance and outlining interim 5-year targets.

2. Leading the Lloyd’s market to a net zero underwriting position

Lloyd’s will advocate and support all market participants to introduce and implement their own net zero plans in order to reach a net zero underwriting position for the market by 2050 at the latest. These new formal expectations will be embedded into the Lloyd’s market oversight framework, putting climate action at the heart of annual business planning cycles with syndicates.

Underpinning this critical development, Lloyd’s is creating a new market-wide ‘Sustainability Transparency and Reporting Regime’ which will be used to measure and report on the market’s progress towards a net zero underwriting position by 2050. The measurement framework will be piloted with a select group of managing agents in 2022, before being refined and scaled across the marketplace in 2023.

The Transparency and Reporting regime will be aligned with and support the ambitions of the Net Zero Insurance Alliance and Partnership for Carbon Accounting Financials (PCAF) to develop a standardised methodology to measure and disclose the GHG emissions of insurance and reinsurance underwriting portfolios, and will help catalyse further action throughout the sector.

By joining the Net-Zero Insurance Alliance, convened by the UN’s Principles for Sustainable Insurance Initiative (PSI), Lloyd’s also becomes part of the Glasgow Financial Alliance for Net Zero (GFANZ), the UN-backed group for financial institutions to make credible net zero commitments through the UN’s Race to Zero. GFANZ now includes over 250 financial firms from across the entire financial system, which are responsible for assets in excess of $88 trillion and are committed to aligning capital with net zero.

“We are delighted to join the Net-Zero Insurance Alliance and are fully committed to working collaboratively across the financial sector to achieve its net zero ambition.”
John Neal, CEO of Lloyd’s
“There is an enormous opportunity for the global insurance industry to step up and support our customers across multiple industries as they transition to a sustainable future. In addition to setting out our own commitments to help accelerate this process through the Net-Zero Insurance Alliance, Lloyd’s also has a unique role to play in helping individuals, companies and communities across the world increase their resilience, innovate and transition to a low carbon economy.”
Rebekah Clement, Sustainability Director at Lloyd’s
“It was in the Lloyd’s building, that I first called on the financial sector to break the ‘tragedy of the horizon’ and confront climate risk before it was too late. I welcome Lloyd’s joining the Net-Zero Insurance Alliance and the Glasgow Financial Alliance for Net Zero (GFANZ). By joining the Net Zero Insurance Alliance, the gold standard for net zero commitments and action, Lloyd’s is demonstrating its commitment to net zero and enabling a more resilient, smooth and rapid transition.”
Mark Carney, the UK Prime Minister’s Finance Adviser for COP26
“Achieving net-zero emissions will require transformation across the entire economy. Insurance will be absolutely critical to enabling that transition and to building resilience to climate shocks. I welcome the ambition from Lloyd’s in leading the Lloyd’s marketplace to a net zero underwriting position by using their influence with market participants to full effect. Industry collaboration will also be essential to turning commitment into implementation and achieving real world outcomes. We have no time to lose.”
Nigel Topping, UN High-level Climate Action Champion

*The Corporation of Lloyd’s oversees and supports the Lloyd’s market, ensuring it operates efficiently and retains its reputation as the market of choice for specialist insurance and reinsurance risk.

1. These targets will be made public within six months of the publication of the NZIA target-setting protocol. They will be consistent with a 1.5°C net-zero transition pathway by 2050 and applicable by 2030. The full commitment text can be found here. 

2. Lloyd’s set out its target for the Corporation to be net zero by 2025 in terms of its own operations in its first Environmental, Social and Governance (ESG) report published December 2020. Lloyd’s recognises that it is for each managing agent make its own decisions on the risks it underwrites, the investments it makes, and the way in which to reduces its operational carbon emissions.

3. Through its chairmanship of His Royal Highness the Prince of Wales’ Sustainable Markets Initiative (SMI) Insurance Taskforce, Lloyd’s continues to play a critical role in helping the insurance sector to collectively advance the world’s progress towards a resilient, net zero economy. Lloyd’s will develop a climate transition measurement framework that will allow the Corporation to begin to track and measure the market’s progress, on an aggregate basis, in transitioning towards a net zero underwriting position by 2050. Following thorough testing and a market pilot with a selected number of managing agents in 2022, Lloyd’s expects to implement a ‘Sustainability Transparency and Reporting’ regime from 2023 onwards to get the first market-wide aggregate baseline view of the carbon contribution of underwriting portfolios to track and report against. More information on the SMI website

4. Lloyd’s Central Fund is available, at the discretion of the Council of Lloyd’s, to meet any valid claim that cannot be met from the resources of any member. Should syndicates need additional assets to meet their liabilities, the funds at Lloyd’s ensure that members have additional resources available. In the rare event that a member’s capital is insufficient and that member is not able to provide further assets to the relevant syndicates, Lloyd’s central capital provides further financial support to ensure valid claims are paid. The Society of Lloyd’s is subject to a regulatory minimum capital requirement known as the central Solvency Capital Requirement (SCR). The central SCR is calculated using Lloyd’s Internal Model, which is subject to independent validation and has been approved by the PRA. In addition, the Council sets the level of economic capital needed above the central SCR. This is the amount of capital the Council deems appropriate to meet Lloyd’s risk appetite and support the market’s ratings and global licence network. 

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About Lloyd’s
Lloyd’s is the world’s leading insurance and reinsurance marketplace. Through the collective intelligence and risk-sharing expertise of the market’s underwriters and brokers, Lloyd’s helps to create a braver world. 

The Lloyd’s market provides the leadership and insight to anticipate and understand risk, and the knowledge to develop relevant, new and innovative forms of insurance for customers globally. 
It offers the efficiencies of shared resources and services in a marketplace that covers and shares risks from more than 200 territories, in any industry, at any scale. 

And it promises a trusted, enduring partnership built on the confidence that Lloyd’s protects what matters most: helping people, businesses and communities to recover in times of need.