Lloyd’s CEO John Neal has urged regulators to give carriers more slack when it comes to their solvency capital requirements in order to facilitate the transition to a NetZero economy.
Speaking at this year’s virtual Monte Carlo Rendez-Vous discussion, Is the insurance and reinsurance industry ready to tackle the risks related to climate change?, Neal was forthright in his views:
“If regulators look at the weight of solvency of our industry and are prepared to give us some license, some consideration, to release some of those investable assets, there is an awful lot of money that our industry can bring to bear to support the ambition of government and industry.”
His comments came as part of a wider discussion of the part the market can play when it comes to climate risk.
“I think there is a huge opportunity for us,” he said. “At our very best as a marketplace we are innovative; we are great at standing in the face of risk and designing new products and services. I think there is a real opportunity for us to face off to various governments, agreeing industrial revolution agendas, and demonstrate that we can stand up the products and services that support the intent.”
“We have to insure transition. That has to be part of our value proposition, provided that we understand transition: what it looks like, where we start from, and what that means in our drive to net zero by 2050. I say that carefully, as it’s not our job to set policy, that’s government, but I think it’s our job to understand what transition looks like and to support it.”
“I think there is an amazing opportunity, which governments are getting more alert to, of being able to partner with insurers in the face of resilience. We have the ability to showcase risk mitigation and risk control measures in advance of the disaster occurring. We have an ability to stand-up economies and communities post disaster.”
Also speaking as part of the panel discussion was Lloyd’s chief of markets Patrick Tiernan, who stressed that the general insurance industry needs to be at the table when these discussions are being seeded, not months or years later, or just before the projects become shovel-ready.
“I think we can provide great expertise as to how that transition can be done in a safer, more sustainable way” Tiernan said.
However, he added: “This isn’t going to be easy. I think that as the risk carriers were first on the pitch with renewable energy will be able to tell us, it’s a rocky road through new risk categories. There have been some significant losses in the area of wind, solar etc but lessons were learned. If we use the syndication power of our industry and the ability to stack risk capital that can absorb it, then we ca sustain through rather than run for the hills when things start to go awry.”
“These weather patterns will continue,” Tiernan said. “We’re not going to be able to halt or rewind some of these impacts, but we have expertise when it comes to risk prevention and adaptation, in order to be more resilient in the face of what are inevitable climate impacts. But with our speed of response, we need to be there the morning before these events happen to prevent loss of life or damage to communities.”
Tiernan also noted that the market’s position is “quite unique” and is entwined with the customer, so the closer it stays to the customers, brokers and the capital that is needed, “the more influential we can be”.