© Lloyd’s 2021

Hard-to-abate sectors

Agri-business

The insurance industry currently provides climate resilience to the agri-business sector, but incentivisingproduction changes could accelerate 25% of identified carbon abatement opportunities
Line of business

Number ofsolutions1

FL, incl. credit and surety

29

Property

27

Liability (incl. D&O and BI)

22

Energy19

Agribusiness: Agriculture significantly contributes to global emissions with practices differing greatly by geography.
Identified abatement measures range from consumer dietary changes to supply-side efficiencies including productionpractices. Combining production changes and electrifying farming vehicles could unlock 25%of abatement options

Abatement
measureAviation

Shipping

Diet shifts
Construction and engineering

15Agri-business

6

Motor (fleet and personal)

4

Alternative Soln. e.g. advisory

4

Cargo and logistics

1Marine (hull, P&I)

0Aviation

020+ solutions

10-20solutions<10 solutions

Animalprotein
production

Net-Zeroemissions2

Development outlook‒Consumption of carbon intensive ruminant animal proteins (namely lamb and beef)
would have to fall by 45% in the Net-Zero pathway‒

Animals’ GHG emissions could be reduced through selective breeding, feed-mix
optimization and methane/nitrification inhibiting additives in feed

-39%

-13%

Cropproduction-9%‒Less pollutive crop production practices would include low/no-tillage production,
improved fertilization practices and better water & irrigation management

Reduction infood waste-8%‒Food waste and loss would need to fall 13% to a 20% global average by 2050

Electrification-3%‒

Electric farm vehicles fully replace internal combustion vehicles by 2050 under theNet-Zero pathway as they are predicted to not only abate carbon but also save costs​

0 solutions

2Classification: Unclassified

Agri-business
ShippingInsurers have an opportunity to form sector-based partnerships which encourage behavioural change to bettersupport the EU objectives and other sustainable goals

Market groups tackling the issue…

Working with market groups..

‒To establish the SMI’s Agribusiness Task Force (ATF),
the former Prince of Wales gathered executives fromsome of the biggest agricultural corporations‒The insurance industry could look for opportunities to form sector-based
partnerships which encourage behavioural change to better support the EUobjectives, or other sustainable goals such as the UN SDGs‒

Its goal is to expedite the adoption of regenerative
agriculture as the world’s primary agricultural system‒

Through insurance solutions that minimise risk and actively promote adoption, there
is a chance to enable investment and incentivise regenerative farming‒

The members worked together last year to determine
what steps the business sector might take to create
scalable value chain blueprints to accelerate thedeployment of regenerative technologies‒

The European Carbon+ Farming Coalition will employ a
farmer-centric approach with partners focusing on
promoting the adoption of regenerative and climatesmart agriculture practises, identifying the barriers toadoption, and devising solutions with advantages forfarmers in terms of economics, practicality, and theenvironment

Aviation‒‒‒

Additionally, it will seek to provide financial instrumentsthat farmers may use to manage transition risk andsuggest the best combination of farmer incentives‒

There is a longer-term/future opportunity to offer farmers insurance on
conditions that lessen the cost of converting to and sustaining a regenerative
systemThe insurance industry can also support on wider actions:‒Encouraging the deployment of enabling technology, where these newtechnologies can promote regenerative farming practices and, in somesituations, act as a crucial enabler, through the provision of insurance
solutions for these technologies or strategic partnerships with techcompanies‒Ensure everyone working in the value chain is aligned to promoting
regenerative farming over conventional farming practices, performancemeasurements could be linked to environmental objectives

Additionally, the industry should prioritise working with Agricultural clients onprotection of biodiversity and ecosystems and water use

3
Classification: UnclassifiedAgri-business
Shipping

Efficiency retrofits and the development of new propulsion methods such as biofuels and hydrogen will requirecontinued support from the insurance industry
Line of business

Number ofsolutions1

FL, incl. credit and surety

29

Property

27

Liability (incl. D&O & BI)

22

Energy19Construction and engineering

15

Agri-business

6

Motor (fleet & personal)

4

Alternative Soln. e.g. advisory

4

Cargo and logistics

1Marine (hull, P&I)

0

Shipping: In 2021 international shipping accounts for ~90% of global trade volumes ($14tn). Reaching net zero by2050 will require ~15% reduction in emissions by 2030, for which an estimated $5bn is required in the immediate term
to advance alternative technologies

Abatement
measureNet-Zeroemissions2

Hydrogen-19%

Bioenergy

-19%

-14%

Energyefficiency

Electrification

Aviation

Aviation20+ solutions

10-20
solutions-4%

Development outlook‒

Low-carbon fuels account for ~45% of fuel intake by 2050, with hydrogen constituting alarge portion of this but long vessel lifetimes may delay adaptation‒‒

Design and implementation of engines powered by ammonia and other biofuels
First hydrogen and ammonia powered vessels due to come into operation in 2023‒‒

Energy efficiency must improve from 30 to 35% by 2050 to reach Net-Zero
Shipping has had limited investment in zero-emission technologies to date, however
retrofitting to meet regulations and improve fuel efficiency/costs is a mainstream
activity‒‒

From 2030, ferries and other vessels for short-sea shipping would be electrified
Technologies to decarbonise shipping are at early stages of maturity with R&D ongoingin alternative fuels, electrification and hydrogen‒

Slowing demand growth driven by a 40% reduction of oil tankers as oil usage
decreases

0<10 solutions

0 solutions

Shipping
demandreduction-4%

4Classification: Unclassified

Agri-business

The insurance industry has a unique opportunity to work with marine market groups to learn and evolve existingofferings

Market groups tackling the issue…

Working with market groups..

‒‒

Shipping‒‒‒

Aviation‒The ‘Maritime Just Transition Task Force’ was set up bythe ICS, the ITF, the UNGC, the ILO4 and the IMO5
during COP 26
First sectoral task force devoted to solving the climate
emergency in a way that is as fair and inclusive as
possible, whilst creating good work opportunities
Seeks to increase and coordinate cooperation in orderto move the shipping industry towards decarbonization
in a safe, equitable, and people-centred manner
between governments, business, labour, academia, etc.
Allianz has partnered with Sea Shepherd, who fight todefend, conserve and protect the ocean. Last year, theycollected 12 cubic metres of garbage made of plastic
and polypro
By deploying its fleet of ships to follow, monitor, andactively obstruct the activity of fishing vessels suspectedof engaging in illegal and unreported activities that leadto the unsustainable exploitation of marine life, Sea
Shepherd is perhaps most known for adopting direct
action techniques to achieve its aims‒

‒

‒

‒

‒

‒

The insurance industry has an opportunity to focus investments or partner with
innovators to facilitate the 4th propulsion revolution
This includes opportunities to form sector-based partnerships which encourage
behavioural change to better support the EU objectives, or other sustainable goals
such as the UN SDGs
With decarbonisation for shipping focused on purchasing offsets to compensate
emissions, growth in carbon market offerings could increase coverage in hard-toabate sectors
Opportunities arising for insurance companies:‒ Liability coverage for failing carbon offsets‒ Coverage of risks related to the use and stock of hydrogen and ammonia inshipping‒ Liability insurance against increasingly demanding energy efficiency standards
There is a short-to-medium term opportunity to adapt Marine insurance products tocover retrofits for current regulations and fuel efficiencies, for example asset
performance products covering performance shortfall
Given the nascent nature of the market, learnings are limited, leaving opportunity forprofitable products specific to those technologies mentioned earlier (e.g. hydrogen,bioenergy and electrification) as a longer-term opportunity
Increasing carrier propositions as limited carrier propositions have been observed so
far e.g. Gard providing P&I and Hull & Machinery cover to Yara Birkeland, the world’s
first autonomous and zero-emission vessel, in 2021

5Classification: UnclassifiedAgri-businessShipping

The insurance sector is well placed to support the aviation transition pathway through innovative solutions andpartnerships

Market groups tackling the issue…

Opportunities for the sector..

‒The SMI’s Aviation Task Force (ATF) is coordinating
efforts to ensure that aviation reaches net zero
emissions by 2050‒

The insurance industry could explore opportunities to form sector-based partnerships
which encourage behavioural change to better support the EU taxonomy objectives,or other sustainable goals such as the UN SDGs

‒While it is feasible to fly without using fossil fuels, effort
is needed to make alternatives like SAFs a reality‒Funding and financial de-risking for the promotion of continued innovation andresearch into Sustainable Aviation Fuels (SAF) is required‒The ATF launched a SAF pocket guide at COP27 topromote adoption within the business community andsupport the goal of using 30% SAF in corporate travelby 2030‒

Improving efficiencies requires joint efforts from a large group of stakeholders but an
opportunity exists for the ITF to collaborate with the Aviation Task Force (ATF) toaccelerate fuel efficiencies‒Potential opportunities for insurance companies:‒The International Air Transport Association (IATA)
members have committed to achieving net-zeroemissions from their operations by 2050

‒Traditional coverage for SAF producers (e.g., biofuels distributors)‒Insurance for SAF supply chain disruptions for airlines

This comprises of coordinated efforts of the entire
industry and significant government support, enabled byCORSIA‒

Liability coverage for failing carbon offsets‒Aviation‒To address emissions from international aviation, theInternational Civil Aviation Organisation (ICAO) adopted
the Carbon Offsetting and Reduction Scheme forInternational Aviation (CORSIA), marking the first time asingle industry agreed to a global-market based
measure in the field of climate change‒

Similarly, by having insurance solutions in other areas such as coverage foralternatives such as high-speed railways, can reduce the demand on aviation, further
reducing emissions‒Decarbonisation for aviation is for now focused on purchasing offsets to compensate
emissions ​so growth in carbon market offerings could increase coverage in hard-toabate sectors

6Classification: Unclassified

Notes & Sources (1)Page numberSourceNotes

44

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI

1. Numbers in the heatmap refer to number of solutions from SMI Insurance Task Force members,
with some solutions in multiple pillars or lines of business; 2. Change Vs. reference case in 2050​

45

SMI: Agribusiness Task Force; European Institute of Innovation and Technology

46

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI; IMO; UN Global Compact; ICS

1. Numbers in the heatmap refer to number of solutions from SMI Insurance Task Force members,
with some solutions in multiple pillars or lines of business; 2. Change Vs. reference case in 2050​

47

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI; IMO; UN Global Compact; ICS

1. International Chamber of Shipping; 2. International Transport Workers’ Federation; 3. United
Nations Global Compact; 4. International Labour Organization; 5. International MaritimeOrganization ​48

McKinsey; IEA; Princeton University; Global Business Travel Association; International Air Transport Association(IATA); SMI

7Classification: Unclassified

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8Classification: Unclassified