Lloyd’s has committed to leading research through Lloyd’s Futureset into the specific risks posed by hydrogen, as part of its latest six point action plan to address climate-related risks, published this week.
The study will include its flammability, and how these risks might emerge in different ways according to how this fuel is used at a sectoral level. Lloyd’s said that this will help corporates and private investors to understand how these risks can be managed and where specialist coverage may need to be introduced or expanded, for example in relation to the transportation of hydrogen.
As Lloyd’s says in its report, Insuring a sustainable, greener future, the EU has put hydrogen at the heart of its green recovery, with a target of 40GW of electrolyser capacity by 2030 79. It also has ambitions to strengthen the hydrogen transportation network in the region, working with gas grid operators to develop the ‘European Hydrogen Backbone’ which leverages existing gas transmission pipelines to connect the demand and supply of hydrogen.
Similarly, the report notes, the UK Government has identified the growth of hydrogen as a strategic imperative and aims to develop 1GW of low carbon hydrogen production capacity by 2025 (increasing to 5GW by 2030).
It also plans to launch a £240m net zero hydrogen fund to promote low carbon hydrogen production in the UK, and will release its formal hydrogen strategy later in 2021.
The previously announced Sustainable Markets Initiative has also established a Hydrogen Taskforce to support and accelerate the deployment of hydrogen globally as one of the decarbonisation tools critical to facilitating net zero emissions.
The Task Force, chaired by Shell, has committed to a number of actions ahead of COP 26 in November 2021 including: creating a template for a hydrogen ecosystem to act as a basis for a hydrogen energy-based economy, developing formal pledges with participating companies committing to the use of clean hydrogen in their supply chains, and identifying policy and regulatory levers needed to accelerate the adoption of hydrogen fuel cells in transportation.
Lloyd’s commitment to investigating hydrogen risk was part of a wider group of proposed actions including the development of new risk transfer solutions to provide critical, enabling support for green innovation and renewable energy investment and expansion, together with a public-private disaster resilience, response and recovery framework, which it is hoped will help protect developing nations from the evolving economic and societal impacts of climate change.
The report also details the steps Lloyd’s is taking now, and will take in the future, across the key themes of greener industry, transport, and energy.
These include working towards de-risking critical decarbonisation activities, closing protection gaps and acting as a facilitator to catalyse action across the industry, customers, government, and other key stakeholders.
To help accelerate the pace of change, Lloyd’s said it will work with critical industries to improve the knowledge around risk landscapes and help the insurance industry adapt to meet changing customer needs, as the world transitions to a sustainable future.
As part of this work, Lloyd’s said it is committed to expanding coverage to support the growth of the greener energy sector and will facilitate the development of new insurance products for electric vehicles.
Actions to be delivered by Lloyd’s:
- Conduct targeted research to understand the risk profile of new construction materials and techniques, exploring the insurance implications and opportunities for new or evolved risk solutions.
- Facilitate a product design sprint to develop an innovative EV insurance product from ideation through to commercial viability to address emerging protection gaps.
- Provide a platform for dialogue between the insurance industry and customers operating in the marine sector to develop insurance coverage for emerging risks.
- Commit to expanding coverage to ensure capacity constraints do not limit the growth of the offshore wind industry.
- Provide a platform for co-ordinated action between the insurance industry, civil nuclear sector and government to meet the additional nuclear liability required by regulations.
- Lead research into hydrogen risks to identify where specialist coverage is needed across the value chain.