The new chief executive of Lloyd’s has stressed the insurance market’s “apolitical” stance in an apparent shift on climate policy, even as he warned of growing threats from an acceleration of extreme weather events.
Patrick Tiernan, who took over as CEO from John Neal in June, said the corporation would no longer discourage insurers operating in the market from underwriting coal and other fossil fuel projects.
In comments to the Financial Times, he said Lloyd’s planned to give its insurers more freedom, adding that “we respect the laws of the land” in the countries where they operate and the corporation defers to “the energy mix that the government of [a] jurisdiction chooses”.
In a statement on the Lloyd’s website, Tiernan said: “We must remain apolitical. Our neutrality is part of our value. In a world of strained trade relations, Lloyd’s licence network can be a safe harbour.”
As well as announcing sweeping trade tariffs, Donald Trump has been expanding oil, gas and coal production, ordering companies to “drill, baby, drill” while ditching green energy programmes. Through his trade deals, he is seeking to impose the US energy shift on other countries, forcing the EU to buy more oil and gas from the US.
In recent years, Lloyd’s warned of an increase in the frequency and severity of climate change-related weather disasters, ranging from the devastating California wildfires to huge floods in Texas this year. The corporation started divesting from coal in 2018.
Tiernan’s predecessor Neal was criticised for being slow to act but in a lengthy report in 2020, Lloyd’s pledged to “start to phase out insurance cover for, and investments in, thermal coal-fired power plants, thermal coalmines, oil sands, or new Arctic energy exploration activities”.
It stated that from 1 January 2022, Lloyd’s managing agents, who act on behalf of insurers, would be “asked to no longer provide new insurance coverage or investments in these activities”. However, Lloyd’s stopped short of mandating divestment to its insurance members, saying it was up to companies to set their own strategy.
While Tiernan’s position seems to mark a clear shift, a Lloyd’s spokesperson denied the market had changed its policy on underwriting energy. “Our aim is to support whatever energy mix individual governments determine is in their jurisdiction’s best interests while enabling managing agents to operate at the vanguard of new energy technologies,” they said. “For the market to run efficiently we must allow participants to make their decisions independently.”
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Tiernan said the world faced the same threats, namely major natural disasters, economic shocks and geopolitical instability. “What’s changing is the tempo – driven by new dynamics including climate change risk, the advent of AI, increasing social unrest and outsized liability awards, or ‘nuclear verdicts’,” he said.
“Add to that a web of interconnected risks – cyber, supply chains, capital flows – and crises no longer ripple, they ricochet. Losses don’t sting, they hurt. Insurers must prepare for chain reactions, not just isolated events.”
Lloyd’s reported a drop in half-year pre-tax profits to £4.2bn, from £4.9bn a year earlier. Gross written premiums rose to £32.5bn, from £30.6bn, while investment returns climbed to £3.2bn, from £2.1bn.
