The drive to achieve net zero will see London’s brokers and insurers forced to innovate in a manner similar to that when the first motor insurance policy was written over 100 years ago. This was the message to US brokers from Christopher Croft, CEO of broker body LIIBA, yesterday.
Speaking online to the Association of Lloyd’s Brokers, a US-based group of Lloyd’s coverholders, Mr Croft said that the journey to net zero will not simply be a matter of adaption for brokers but instead will mean doing things differently and embracing new technologies. However, he argued that the need for innovation means that regulators will need to be less demanding in their requirements for data because in some cases that data will not exist.
Mr Croft said:
“These days, insurance is the study of sizeable amounts of historic performance data. We simply won’t have that here but we need to find a way not to let that get in the path of progress. The need for vast amounts of data to support underwriting decisions is driven by the attitudes of our regulators. So, if we are to be the bedrock of net zero that those same regulators are telling us we have to be, then they must play their part.
“They will have to discover the flexibility and adaptability necessary to allow them to adjust their approach to ensure markets can be formed around the necessary new products.
“Our Treasury is already engaged in a review of the regulatory framework in UK and data is a key issue we have flagged with them as part of our input to the consultation. It has to be hoped that this appeal to a higher authority will have the desired effect.”
Comparing the development of motor insurance and the insurance products needed to address climate change, Mr Croft said:
“I am reminded that, when the first motor insurance policies were being drafted as the nineteenth century turned to twentieth, the approved Lloyd’s wording for defining an automobile was ‘a ship that sails on land’. We may need to achieve similar levels of innovative thinking to meet the challenges of insuring this new wave of disruptive technology. Already I have sat in on discussions about electronic ferries and electronic airliners. If these as yet relatively untested new inventions are to come into commercial use in time for 2050, we will need to find innovative ways of insuring the risks inherent in that.”
Measuring and tracking progress towards net zero will also be a challenge for the London insurance market. Mr Croft said: “Insurance brokers will be at the heart of developing ways for their clients to assess their carbon impact. And we will need to do the same ourselves in our firms.”
Christopher Croft was presenting to the Association of Lloyd’s Brokers.