The insurance industry must rise to the challenge of damage from climate change
Insurers will need to start to get to grips with the damage which could be wrought by climate change, writes Nicholas Lyons
Almost every day, we hear word of a new cyber attack that has threatened people’s safety and security, or a climate change disaster that’s claimed lives and livelihoods. One in ten businesses experienced cybercrime between 2022 and 2023.
Meanwhile, the effects of climate change are wreaking havoc right across the globe – from the devastating Turkey-Syria earthquake to a horrific mudslide in China.
As world leaders and global organisations strive to tackle these issues, new challenges and opportunities emerge for the global insurance industry.
Canada is – quite literally – the birthplace of the insurance market. It rose like a phoenix from the ashes of the city after the Great Fire of London devastated the capital in 1666.
And, today, London is a key partner for insurance and reinsurance clients globally, with deep pools of expertise in specialty underwriting, risk management and claims handling for those large, challenging or developing risks that local insurers either do not wish to – or cannot – underwrite.
Every one of the top 20 global insurance and reinsurance firms and brokers is based in London, and nearly 90 per cent of London’s insurance capital comes from overseas. We’re also home to the highest concentration of insurance talent – with 65 insurance and reinsurance companies sitting within just 500 metres of each other.
Hot off the launch of our new “Vision for Economic Growth” report – which sets out a roadmap for UK financial and professional services to drive economic growth – this week I will travel to the Rendez-Vous de September, the annual gathering of the global reinsurance industry in Monaco.
In a reflection of our renewed focus on insurance, it will be the first time the Lord Mayor of London has participated in the Rendez-Vous. I’ll meet with chief executives of many insurers, reinsurers and brokers from around the world to hear their views about the global environment and London as the world’s leading subscription market, and what we can do to make ourselves even more competitive. Especially important will be how the global market perceives London’s unique offer in managing climate and cyber risks.
London is the current leader in cyber insurance. And, as cyber becomes a growing threat, the global cyber insurance market is projected to grow from $7.01bn in 2020 to $20.56bn in 2025.
Climate change is – of course – another growing risk and opportunity for insurers, with the London & International Insurance Brokers Association estimating the London insurance market could double in size just by covering the global transition to green energy for policyholders looking to achieve net zero.
Insurance carriers and government and supranational bodies need to find a way to progress the models of private-public partnership and provide cover for the global impact of the major risks we are facing.
Cyber, climate and pandemic risks are of such scale that they cannot be covered by the private sector alone, but we haven’t yet found the best and most capital efficient way to pool exposures and share risk between the public and private sectors. Solving these challenges should play to London’s strengths.
As the City burned in 1666, it would have been difficult for residents to imagine a future beyond the flames. As cyber threats and climate change threaten life as we know it, we must ensure London – and the London insurance and reinsurance industry – is part of the solution.