A ‘silent’ low-carbon transition is already underway in the insurance sector: LMA

Ahead of the next COP meeting, the Lloyd’s Market Association (LMA) has commissioned a report: Endorse the transitionin which KPMG examined the challenges, risks and benefits of the transition to a low-carbon economy for the insurance sector over the next twenty years, focusing on eight key economic sectors in the Lloyd’s market and identifying potential pathways for decarbonisation.

Based on KPMG expertise and interviews with Lloyd’s insurers, the report outlines potential emissions reduction measures between a ‘business as usual’ scenario and a 1.5°C reduction in line with the Paris Agreement.

Paul Davenport, Finance & Risk Director at the LMA, said: “As the leading global marketplace for complex and specialist insurance, Lloyd’s is a center of deep expertise, product innovation and capital.”

He continued: “The 55 managing agents who are members of the LMA already play a vital role in supporting key sectors through their transition, but to maintain this leadership they need a clear understanding of the strategic, operational, regulatory and financial risks associated with it. be managed.”

The report highlights the critical role of the insurance sector in achieving the goals of the Paris Agreement and highlights that a ‘silent’ transition is already underway as companies adapt to new transport, renewable energy and low-carbon building materials.

Roger Jackson, KPMG Global Insurance ESG Lead, who led the research team, added: “Now more than ever, insurance is needed to support the transition to a low-carbon economy. This report seeks to provide a common view on the transition sectors that are also critical to Lloyd’s insurers.

“As a result, it provides deeper insights into the opportunities and risks of transition for insurers, supporting the insurance recommendations in the Transition Finance Market Review’s recently published ‘Scaling Transition Finance’ report. Only by understanding the transition processes of companies in more detail can insurers really help and realize the opportunities and risks of the transition.”

The report warns that the ‘silent’ transition and associated data challenges could lead to product and price misalignment if these risks are misunderstood.

Insurers that already endorse the transition can benefit from investigating how risks develop and from exploring new opportunities to engage with policyholders and increase relevance.

Davenport explains: “The insurance industry, traditionally viewed through the lens of risk management and protection, is a critical partner in this transition. Without insurance, companies will struggle to achieve their transition goals or build resilience against the impacts of a changing climate.”

“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 are occurring in government policy, regulation and in the portfolios and risk profiles of market participants,” Davenport concluded.