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Dec 18, 2020

Lloyd's to integrate sustainability into all business activities

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In the Press Release available here on Lloyds.com the market announced its plans for accelerating the transition to a more sustainable (re)insurance marketplace.

Lloyd’s first "Environmental, Social and Governance Report 2020" which is available here as a downloadable pdf. lays out the steps to integrate ESG principles into its underwriting and investment activities:

Firstly, Lloyd’s is requiring managing agents to phase out the underwriting of new insurance policies for thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities from 1 January 2022. To ensure that customers are supported through this transition period, the phasing out of existing policies is expected to be complete by 2030.

Secondly, Lloyd’s Corporation and market will make no new investments in thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities. These are expected to have been phased out by Q4 2025.

Thirdly, guidance to be issued to derive 2% of annual premium income from innovative and sustainable insurance products.

Bruce Carnegie-Brown, Chairman of Lloyd’s said: “This is the first time we have set an ESG strategy for the Lloyd’s market and it represents an important milestone on the journey towards building a more sustainable future. We have the opportunity to play our part in building back a braver, more resilient world. We recognise that the targets we are setting will be challenging, but will also bring new opportunities. We will work closely with our market and customers to help them plan for these changes as we implement a long-term managed programme towards sustainable, responsible underwriting.”

Environmentally focussed investors are concerned about the impact of their investments and the role their assets can have in promoting global issues such as climate action. A widespread attention to ESG investing is now manifest known as "sustainable investing."

The (re)insurance sector has an important role to play in supporting the global effort to address climate change in the context of the 2021 United Nations Climate Change Conference (COP26), and also in responding to UK Government’s Ten Point Plan for a green industrial revolution.

As Jerome-Jean Haegeli, Group Chief Economist at Swiss Re stated earlier this year "We cannot quantify the exact effects climate change has on weather related catastrophes, but it is clear that climate change is a systemic risk to the global macroeconomy."

AIR Worldwide has written a recent paper on the impact of climate change upon US hurricane risk which is available here.