Lloyd’s ban on coal risks not quick enough for campaigners

Lloyd’s announcement that it will allow its syndicates to insure thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities until 2030 has come under fire from climate campaigners.

The announcement has soured the news that the market will ban the acceptance of any new risks in those classes from the end of next year.

Campaigners have welcomed the news that market is moving to ban the underwriting of risks which impact the climate but said the prohibition should have been immediate.

It came as the market has issued its first Environmental, Social and Governance Report which detailed its ambitions on a route to net zero operations.

Within the document, published on 16 December, Lloyd’s has committed to:

  • drive culture change in the Lloyd’s market through the provision of practical guidance including the Cultural Toolkit, and the setting of regularly measured targets. These include a phase one target of 35% female representation in leadership positions across the market (to be achieved by 31 December 2023), and new targets for Black and Minority Ethnic representation in leadership positions to be announced in 2021.
  • encourage all insurance undertakings in its market to allocate 2% of annual premiums towards innovative and sustainable products by 2022 and will provide guidance to deliver on this ambition.
  • develop a new risk centre, to be launched in 2021, and will undertake research into new insurance products to protect society from systemic risks, including climate risk.
  • target a 5% allocation of the Central Fund to impact investments by 2022.
  • end investment in thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities. This involves ending new investments in these areas by Lloyd’s market participants and by the Corporation, from 1 January 2022, and the phasing out of existing investments in companies with business models that derive 30% or more of their revenues from thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities by the end of 2025.
  • publish a road map that will set out how the Corporation will become net zero in its operations by 2025 and will work with the market to support their own implementation of net zero emission plans.
  • Managing agents in the Lloyd’s market will be asked to no longer provide new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands, or new Arctic energy exploration activities from 1 January 2022. To enable the market to support their customers as they transition their businesses, the target date for phasing out the renewal of existing insurance cover for these types of businesses is 1 January 2030 (including for companies with business models which derive 30% or more of their revenues from any of these activities). Lloyd’s will consult with the market and policyholders and provide ongoing support and guidance during this period of transition.

The news that the market will not adopt new risks from the end of 2021 has been given a guarded welcome by climate groups who are also dismayed that the market will continue to underwrite exiting risks until the end of the decade.

“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,” Bruce Carnegie-Brown, Chairman of Lloyd’s ESG committee and Chairman of Lloyd’s said.

“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.”

Earlier this month climate campaign Insure Our Future campaign released its fourth annual Scorecard on Insurance, Fossil Fuels and Climate Change which revealed that Lloyd’s was the last major insurance entity in Europe to continue underwriting coal.

Commenting on the report Lindsay Keenan, European Coordinator for Insure Our Future, said: “We welcome Lloyd’s new policy of no longer providing new insurance cover for coal-fired power plants, thermal coal mines, oil sands and new arctic energy exploration as a step in the right direction.”

“However, the policy should take effect now, not 2022. Additionally, the target date for Lloyd’s to phase out existing policies should be January 2021 for companies still developing new coal and tar sand projects. Lloyd’s 2030 deadline is not justified by climate science and the urgent need for action. We will continue to hold Lloyd’s accountable until it has met these recommendations.”

He added the Lloyd’s market is estimated to have accounted for approximately 40% of the total global energy insurance premium in 2018. Lloyd’s management and members bear responsibility when they insure and therefore support projects that fuel the climate crisis.

Flora Rebello Arduini, Senior Campaigner Consultant for SumOfUs, called for greater clarity to ensure that syndicates do not look to find ways in which to bend the rules to find ways to continue to underwrite the risks.

“Lloyd’s needs to prohibit all members of its market from renewing insurance for the Adani Carmichael coal mine, the Trans Mountain tar sand pipeline extension and other such climate wrecking projects when they come up for renewal in 2021, not in 2030,” she explained. “The time to act is now. Lloyd’s must set binding market-wide policies that make clear to all stakeholders what can and cannot be done under Lloyd’s brand name and credit rating.”