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Insurance industry’s financial clout key to fighting climate change: Lloyd’s CEO Neal

4th April 2022 - Author: Pete Carvill

Lloyd’s CEO John Neal has said climate change is the ‘single biggest opportunity’ he has seen in his career.

john-neal-lloyds-ceoSpeaking on the Lloyd’s 2021 earnings call, Neal said that he saw climate change not as a threat, but as an opportunity for the industry ‘to stand up and be counted’.

Neal said that there were three elements to his argument.

He said: “I think it’s important you insure transition. We’re not going to set or design policy, that’s the government’s job. It’s way beyond our paygrade, way more complex than we should address. So, if government says net zero by 2050, it’s net zero by 2050. It’s not 2040 or 2035. And, I think, people that step into that are being a little naïve; governments understand the complexity.”

It is up to the industry, said Neal, to be the insurers of the transition. He said that this will include knowing what a sound management framework looks like.

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The second part, he said, is having the evidence that the industry can create product and solutions that will sustain a different world and its infrastructure.

He added: “We’re involved in nuclear, we’re involved in hydrogen, we’re involved in carbon storage, we’re involved in wind, we’re involved in battery, we’re involved in solar, and I think we’ve got to keep our efforts going in that respect.”

The last prong of Neal’s argument was the financial clout of insurers and of how it can be used to progress transition.

Neal said: “There are more assets held by the insurance industry globally than there are in pension funds. 35% of the world’s assets are held by insurance companies. So, we really can power governments ambition to affect transition. So there are three ways in which we can work on climate, all of which are net positive.”

He added: “Let’s assume the numbers, and it’s $300 trillion to effect transition to net zero by 2050. So, that is $10 trillion a year, that is 10% of GDP. That is transition in infrastructure. To me, that’s just got to be an opportunity. So, that’s got to be financed, it’s got to be insured, and there’s going to be different technologies, different types of activity for us to get involved in. So, that’s why I’m an optimist.”

He concluded: “I’m an optimist because we must address climate change, I don’t think anybody should doubt that anymore. I’m an optimist because at COP26, one of the two positives that came out of that, was the financial services industry sticking its hand up and saying the money is here, if and when you want it.”

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