Insuring a sustainable,
greener future
A roadmap for climate action

Contents

02

Contents
1.

Foreword



03

2.

Introduction 

13

3.

Greener Industry 

16

3.1

Homes, Commercial and Public Buildings 

17

3.2

Green Finance 

22

4.

Greener Transport 

25

4.1

Jet Zero 

26

4.2

Greener Maritime 

30

4.3

Electric Vehicles 

34

5.

Greener Energy 

39

5.1

Offshore wind 

40

5.2

Nuclear 

44

5.3

Hydrogen 

50

6.

Committing to action 

56

Lloyd's. Insuring a sustainable, greener future1. Foreword

1. Foreword

Lloyd's. Insuring a sustainable, greener future

03

1. Foreword04

1. Foreword
Insuring a sustainable, greener future
Climate change is the largest, most challenging crisis the world has faced,bringing increasing risk and uncertainty for society, and for the future of
our planet. With growing risks that threaten the livelihoods and futures ofindividuals, communities and entire ecosystems, there has never been amore important time for global collaboration and action on a vast scale.

John Neal, CEO, Lloyd’s

As a systemic risk like no other, there is an increasing urgency forgovernments, industries and communities to respond to the challenge,
as well as the scale of opportunity it presents. With the world beginningto emerge from the devastation of the COVID-19 pandemic, we have acollective responsibility and imperative to put sustainability and inclusion
at the heart of global economic and societal recovery.

Bruce Carnegie-Brown, Chairman,
Lloyd’s

Governments and industries across nations are coming together to takeaction through a number of significant commitments and initiatives toaccelerate the transition to net zero. These activities will drive rapid
decarbonisation across economies and sectors, alongside the expansionof greener energies and business models worldwide. Delivering climate
resilience will require adaptation of our global systems, including our built
environment, industry, transportation and energy. All of these changes willneed to be paired with concerted action to ensure that the implications of
the transition do not leave any person, business or industry behind.
With a unique view of the climate crisis, through its many decades
providing support to communities, businesses and economies in theface of increasingly severe and frequent weather events, Lloyd’s and theglobal insurance industry have a critical role to play in building a moresustainable, greener future. Alongside mitigating and managing the impactof these disasters, the industry continues to provide financial support
across multiple industries to build greater climate resilience and support
the increased scale and speed of the transition.
As risk managers, risk carriers and investors, insurance is a powerfulenabler, providing innovative products and services to finance, manage
and accelerate the decarbonisation of industries and economies, as wellas the growth of greener industry, greener transport and greener energy.
This includes using its expertise to help increase levels of safety inmanaging new fuels and new construction techniques, facilitating
increased collaboration between the public and private sector to support
vulnerable developing nations, and directing its own capital reserves
away from carbon-intensive sectors towards green solutions.
This report sets out the sustainability and decarbonisation ambitions of
the sectors that are critical to a successful global transition to a low carbon
economy, together with a climate action roadmap that highlights the ways
in which the global insurance industry will support and accelerate thistransition and the delivery mechanisms which will be deployed.

Lloyd's. Insuring a sustainable, greener future

SMI Insurance Task Force Membership
AIG: Peter Zaffino, President and CEO
Allianz: Oliver Bäte, CEO
Amwins: Scott Purviance, CEO
Aon: Greg Case, CEO
Ascot: Andrew Brooks, CEO
AXA: Sean McGovern, CEO UK & 		
Lloyd’s, AXA XL
Beazley: Adrian Cox, CEO
Conduit Re: Neil Eckert, Executive
Chairman
Direct Line Group: Penny James, CEO
Hiscox: Bronek Masojada, CEO
Howden Group: David Howden, CEO
Legal & General: Nigel Wilson, CEO
Lloyd’s: John Neal, CEO
Marsh McLennan: Dan Glaser, 		President and CEO
Munich Re: Joachim Wenning, CEO
Phoenix: Andy Briggs, Group CEO
Tokio Marine Kiln: Brad Irick, CEO
Aon Reinsurance Solutions: Dominic
Christian, Global Chairman
Insurance Development Forum: 		
Ekhosuehi Iyahen, Secretary General1. Foreword05

1. Foreword
The role of Lloyd’s and the global insurance industry in the climatetransition constitutes three main areas of action:

1.

Pioneer new risk transfer solutions for green innovation.
The scale and pace of green innovation required acrossmultiple sectors and geographies will require new andextensive risk management and transfer solutions.
 loyd’s and the global insurance industry can strengthenL
its support for private and public sustainability initiatives
and innovation by pioneering new risk transfer solutions
that empower customers to develop, invest and growthese activities as the world transitions towards asustainable future.

2.

Support and accelerate the transition of carbon-intensive
sectors. As carbon-intensive sectors embark on theirrespective decarbonisation pathways, the global insurance
industry will need to support its customers, and the risk
ecosystems they operate in, to actively reduce the carbon
intensity of their activities.
 loyd’s and the global insurance industry can achieve thisLthrough its unique ability to support customers to unlock
the opportunities of the transition and navigate a changing
risk landscape.

3.

Harness $30tn capital pool to drive positive change.
Green finance is a critical enabler of the transition. There is aunique opportunity to harness the global insurance industry’s
more than $30 trillion capital pool and direct this towards
more sustainable investment opportunities.
Lloyd’s and the global insurance industry can align its
investment activities with the scale and pace of change
needed across industries and economies.

To catalyse and deliver action across these three areas, Lloyd's is chairing
a newly convened Sustainable Markets Initative, launched by HRH the
Prince of Wales, whose membership comprises many of the world's largest
insurance firms. As an influential platform for the global insurance industry
to collectively advance the world’s progress towards a resilient, net zeroeconomy, the Task Force will drive climate positive action at pace, througha number of key initiatives set out in this report.

Lloyd's. Insuring a sustainable, greener future

London Advisory Committee
Andrew Brooks, Chair, Lloyd’s Market
Association
Sheila Cameron, CEO, Lloyd’s Market
Association
Christopher Croft, CEO, London andInternational Insurance Brokers 		
Association
Richard Dudley, Chair, London andInternational Insurance Brokers 		
Association
Julian Enoizi, CEO, Pool Re
Huw Evans, Director General, 		
Association of British Insurers
Sian Fisher, CEO, Chartered InsuranceInstitute
Caroline Wagstaff, Interim CEO, 		
London Market Group
Steve McGill, CEO, McGill and Partners
Bronek Masojada, Chair, Placing 		Platform Limited
Dave Matcham, CEO, International
Underwriting Association
Robert Kuchinski, Chair, International
Underwriting Association

1. Foreword

06

1. Foreword
At such a critical moment in time, with monumental change andtransformation across every industry and economy, the insurance
industry’s role in accelerating the world’s transition to a more sustainable
future has never been so important. Lloyd’s is proud to be leading the way,in partnership with many of the world’s most influential insurancecompanies, to take action and join the global reset on climate.
Lloyd’s climate action roadmap towards a greener future

Greenerindustry

Now

Next

BeyondImmediate insurance industry
action to de-risk critical
decarbonisation activities

Further enhance understanding of
the evolving risk landscape forpriority sectors

Deepen understanding of the risk
ecosystem and stand ready tosupport emerging technologies

The global insurance industry
has an impressive role to play insupporting and accelerating thesedevelopments. Lloyd's will:

The global insurance industry
needs to understand how thesetechnologies may emerge and thepotential impact on the risklandscape. Lloyd's will:

The global insurance industry
will need to be aware of newtechnologies and adapt theirofferings in the longer term toreflect new risks. This includes:

Convene SMI workstream foropen source disaster recovery
framework

Lead a research initiative into
construction materials andtechniques

Hydrogen power for homes
and public buildings

Convene stakeholders tounderstand risk profile ofsustainable materials /techniques
Convene SMI workstream
for green assets
Convene SMI workstream
to drive innovation acrossinsurance supply chain

Greenertransport

Convene SMI worksteam andindustry stakeholders for acollaborative product design
workshop to address potential
protection gaps

Facilitate a product design
sprint to develop and bringproducts to market

Development of sustainable
fuels (including hydrogen
powered aircraft and ships)

GreenerenergyConvene SMI workstream
to focus on green assets(including offshore wind)Commit to expanding coverage
to ensure capacity constraints
don't limit growth

Next generation nuclear
technology

Work with SMI Hydrogen
Task Force to open up
discussions with customers

Lead research into specific risks
posed by hydrogen and explore
coverage requirements

Provide a platform to ensure
coordinated action between
stakeholders to meetcapacity demands

Lloyd's. Insuring a sustainable, greener future

Carbon capture andstorage technology

1. Foreword

07

1. Foreword
Lloyd’s Climate Action Roadmap Overview
For each of the sectors identified in this paper as critical to a successful
global transition to a low carbon economy, we have articulated aroadmap for tangible action to accelerate change. We have identified
three key enablers to deliver on these actions:
1.

2.

3.

The global insurance
industry

Lloyd’s in its role aschair of the SMI
Insurance Task Force

Lloyd’s

Actions which the global insurance
industry should collectively takegoing forward. The global insurance
industry refers here to the wholeinsurance ecosystem spanning
across all geographies, lines ofbusiness and size of market share.

Actions which will be delivered
through the Sustainable Markets
Initiative Insurance Task Forcewhich includes representatives
across the global insurance industry.
Lloyd’s will accelerate change in its
role as Chair of this Task Force.

Actions which Lloyd’s will progress.
This refers specifically to actions
which the Corporation of Lloyd’s willtake to accelerate change with the
Lloyd’s market as part of the wider
insurance ecosystem.

1. Foreword

1. Foreword
Greener Industry
Green Finance
The insurance industry has a significant opportunity to direct capital towards
climate-positive solutions and products. It can achieve this through actively
integrating ESG factors into the investment decision making process, proactively
making impact investments into areas of the economy which are actively
decarbonising and excluding investment from particularly carbon-intensive
sectors which are failing to commit to the transition.
There is also a significant opportunity for the global insurance industry to
collaborate with investors and governments to provide financing structures tosupport disaster resilience, response and recovery in developing countries.
Through its role as Chair of the SMI Insurance Task Force, Lloyd’s has:– Convened a workstream focused on supporting and encouraging moresustainable investment. In 2021, the workstream will develop a framework foraccelerating and scaling sustainable investment, to help unlock the global
insurance industry’s more than $30tn in assets under management, increasingly
directing capital towards investments that drive climate-positive outcomes inboth developed and developing nations.
– Convened a workstream dedicated to establishing a public-private disaster
resilience, response, and recovery framework to help protect developing
nations from the evolving economic and societal impacts of climate change,
including the effects of increasingly frequent and severe weather events. The
framework will combine an insurance product with risk management and loss
recovery services. Lloyd’s, as part of the SMI, will work closely with key
stakeholders including insurers, governments, aid agencies and data providers
to deliver a pilot scheme in 2021.

We believe these enablers will allow us to strike an appropriatebalance between effectively delivering what is within our control andprogressing actions where broader industry collaboration andpartnership is necessary for success. The colour coding of the roadmap
for action described below corresponds with the colours introduced
above, to indicate which delivery mechanism will be deployed toprogress each action.

Key:
Lloyd's. Insuring a sustainable, greener future

08

The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

Lloyd's1. Foreword

09

1. Foreword

1. Foreword

10

1. Foreword
Greener Transport

Homes, Commercial and Public Buildings

Electric Vehicles (EVs)

The shift towards using more sustainable materials, new construction methods
and alternative energy sources has significant implications for the risk profile of abuilding, which insurers will need to understand. Insurers should explore how toincentivise customers to lower the carbon footprint of their building(s), and/or
more readily introduce 'build back better' wordings in policies. This should bebalanced with understanding the risk profile of sustainable materials and new
construction techniques, to ensure that the application of these does not
ultimately result in increased claims exposure.

The business model of automotive companies operating in the EV sector isshifting from manufacturing towards providing full lifecycle solutions tocustomers. New insurance requirements are emerging as a result of this change
in business model, for example an increase in demand for non-damage businessinterruption cover to protect against enhanced risks of connectivity, and coverfor inter-connected global operations (compared to cover for local operations).
Insurers will need to refine their product offerings to remain relevant in achanging industry.

Through its role as Chair of the SMI Insurance Task Force, Lloyd’s has:– Convened a workstream dedicated to developing and launching an industry-wide
framework for greener insurance supply chains to drive sustainable outcomes forcustomers, including through claims processes.

To drive innovation and accelerate product development, through the SMI
Insurance Task Force Lloyd’s will:– Design an innovative EV insurance product to address protection gaps as
new risks emerge and vehicle business models evolve.

In addition, Lloyd’s will:– Conduct targeted research to understand the risk profile of new construction
materials and techniques, exploring the insurance implications and opportunities
for new or evolved risk solutions.

Lloyd’s will then:– Facilitate a product design sprint to develop potential products from
ideation to commercially viable products.
Jet Zero and Greener Maritime
As the aviation and marine sectors accelerate their efforts to drive sustainability
through advancements in technology and alternative sources of fuel,opportunities will emerge for the insurance industry to support theirdecarbonisation pathway. Insurers should understand the risk implications oftechnological advancements, including resulting changes in infrastructure suchas fuel transportation and storage, to ensure that cover is made available for
emerging and alternative marine and aviation risks at the moment it is needed.
To support and drive innovation across the aviation and maritime sectors, theSMI Insurance Task Force will:– Work closely with the SMI Aviation and Shipping task forces to open up
discussion with customers embarking on research and development in this area
to identify requisite insurance coverage for emerging risks and new technologies.
In addition, to support and accelerate the growth of greener maritime, Lloyd's will:– Provide a platform for dialogue between customers and insurers operating in thisspace to understand the specific challenges customers are facing and develop
insurance coverage for emerging risks, in particular those associated withretrofitting of the global fleet to drive operational efficiency.

Key:The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

Lloyd's
Lloyd's. Insuring a sustainable, greener future1. Foreword

11

1. Foreword

1. Foreword

12

1. Foreword

Greener Energy

As global leaders in providing insurance for the nuclear energy sector, Lloyd's
will support the increase in nuclear insurance capacity through:Offshore wind– Providing a platform to ensure there is co-ordinated action between theinsurance industry, civil nuclear sector and government, and to ensure that
nuclear operators are able to meet the additional liability required byregulations.

Offshore wind projects continue to increase in scale and complexity, withadvances in turbine technology (with respect to foundation depth, distance fromshore and power output of each turbine) evolving rapidly. The global insurance
industry has a unique opportunity to further expand the coverage it provides tothe offshore wind sector to meet demands for additional insurance capacity,which is being driven by the rapid advancement of new offshore wind technology
including turbines and floating wind technology.

HydrogenHydrogen is a vector of change and facilitator of decarbonisation for several
sectors and significant investment will be required to develop hydrogen
infrastructure. The use of hydrogen also introduces unique safety implications
which will need to be appropriately identified, measured, monitored andmanaged, and insurers are well-placed to support customers across multiple
industries with this.

In addition, given the size of many offshore wind projects, a blended financing modelis necessary which typically requires a combination of investment from private
corporates (often large utilities and/or oil and gas companies), overseas investors
and large institutional investors to achieve success.

Insurers should enter dialogue with corporates operating across the hydrogenvalue chain to better understand the challenges they are facing in obtaining
specialist insurance cover, and consider how cover may need to be segmented
or consolidated across components of the hydrogen value chain to prove
effective.

To support and accelerate the growth of offshore wind, the SMI Insurance Task Force has:– Convened a workstream focused on supporting and encouraging moresustainable investment, including into offshore wind projects. In 2021, theworkstream will launch a green investment proposal, outlining the intent andcapability of the insurance industry to make resources available to support
green investment, and the regulatory changes required to realise this ambition.

To help facilitate the development of hydrogen, the SMI Insurance Task Force will:– Provide a platform to ensure there is co-ordinated action between theinsurance industry, operators in the offshore wind sector and private investors.
In addition, Lloyd’s will:– Work closely with the SMI Hydrogen Task Force to open up discussion withcustomers operating in this space on the specific challenges they are facing todevelop insurance coverage for innovative or prototypical hydrogentechnologies and infrastructure.

– Commit to expanding its coverage to ensure capacity constraints do not limit
the growth of the industry.

To support this, Lloyd’s will:– Lead research through Lloyd’s Futureset into the specific risks posed byhydrogen, including its flammability, and how these risks might emerge in
different ways according to how this fuel is used at a sectoral level. This will help
corporates and private investors to understand how these risks can be managed
and where specialist coverage may need to be introduced or expanded, forexample in relation to the transportation of hydrogen.

Nuclear
The global insurance industry has a unique opportunity to further expand thecoverage it provides to the nuclear industry in order to meet demands for
additional insurance capacity, which is being driven by anticipated regulatorychanges and the development of new nuclear capacity. The Lloyd’s market
provides significant capacity to nuclear risk specialists NRI (the British Nuclear
Insurance Pool) and Northcourt (an independent MGA), who take an active leadin identifying how to increase insurance capacity for the sector, and what
combination of government support, risk pooling, and mutual arrangements isneeded to ensure adequate protection is available.

Key:
Lloyd's. Insuring a sustainable, greener future

The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

Lloyd's

2. Introduction

2. Introduction

Lloyd's. Insuring a sustainable, greener future

13

2. Introduction

2. Introduction
Climate change is a systemic risk which affects financial stability,
broader economic resilience, and human prosperity. Extreme weather
events, climate action failure and human environmental damage havebeen recognised as the top three global risks by the World Economic
Forum for the past three years 1.
In 2015, 197 countries adopted the Paris Agreement, the central aim of which includes
driving efforts to limit global mean temperature rise to 1.5°C relative to pre-industrial levels.
The risks posed by global warming, including extreme impacts to natural and human
ecosystems and climate-related risks to health, livelihood, food security, water supply,
human security and economic growth, are projected to increase with global warming of
1.5°C. Achieving the central aim of the Paris Agreement will require “rapid and farreaching” transitions in land, energy, industry, buildings, transport and cities 2.
The International Energy Agency's World Energy Outlook for 2020 predicted a rapid
growth in renewables across all its modelled scenarios, with the share of coal in the global
power generation mix predicted to fall from 37% in 2019 to 28% by 2030 in the statedpolicies scenario, and to 15% by 2030 in the sustainable development scenario3. To
complement the increased use of renewable energy, an integrated transition acrossmultiple sectors will be crucial to enable a low-carbon future.
Technologies such as hydrogen and nuclear power will be critical in providing the stableenergy production needed to support an energy system more reliant on renewable energy.
In addition, other sectors such as transportation and construction contribute 24%4 and39%5 respectively to global carbon emissions, demonstrating that it is not just power
generation that has to change but also our built environment, and the way we evolve it.
From the perspective of the global insurance market, the increasing frequency andseverity of natural disasters resulting from climate change have already createdincreased exposure and vulnerability to loss; and these events also bring devastating
impacts to society and the economy, with significant physical risk and transition risk
exposures emerging.

1
2
3
4
5

World Economic Forum – The Global Risks Report 2021
Intergovernmental Panel on Climate Change - Global Warming of 1.5 ºC — (ipcc.ch)World Energy Outlook, 2020 - World Energy Outlook 2020 – Analysis - IEA
International Energy Agency - Tracking Transport 2020 – Analysis - IEA
International Energy Agency - Global Status Report for Buildings and Construction 2019 – Analysis - IEA

Lloyd's. Insuring a sustainable, greener future

14

2. Introduction

2. Introduction
As an industry that not only protects against the evolving impacts of climate change,
but also provides vital protection to enable cross-industry climate innovation, there isan urgent and once-in-a-generation opportunity for the global insurance industry
to support and accelerate the transition towards a more sustainable, greener future.
As new markets emerge and new technologies develop, there will be a need for the
global insurance industry to innovate in its approach to delivering risk transfer products
and services to finance, manage and protect against a rapidly changing risk landscape.
This includes:– Using its expertise to pioneer new risk management and transfer solutions– Supporting carbon-intensive sectors with an orderly transition to a low-carbon economy– Directing its own capital reserves away from carbon-intensive sectors towards greener
investment opportunities to drive positive changeThis paper focuses on a selection of sectors whose individual and combined actions will be
critical in the world’s united journey and ambition to rapidly decarbonise and protect the futureof the planet. For each sector, we have outlined the global pathway towards a lower carbon
footprint and explored the challenges on that journey that require solutions and support. We
have then set out a roadmap for insurance industry action which will be critical in fast-tracking
global decarbonisation efforts and the transition to a low carbon economy.

Lloyd's. Insuring a sustainable, greener future

153. Greener Industry

3. Greener Industry

Lloyd's. Insuring a sustainable, greener future

163. Greener Industry

17

3. Greener Industry
3.1 Homes, Commercial and Public Buildings
Introduction
The construction industry accounts for 39% of the world’s greenhouse gas (GHG)
emissions. The World Green Building Council has called upon businesses, organisations,cities, states and regions to take immediate climate action towards decarbonising the built
environment, with the ambition of all buildings being net zero by 2050, including both new
constructions and existing building stock 6.
The Nordic region is a global leader in the development of green buildings; the region
uses 30% more energy in buildings compared to the rest of Europe due to its long wintersand larger living areas per person, yet the corresponding CO2 emissions are 50% lower
than the EU average. This is due in large part to a larger share of renewable energy use,
especially from biomass, together with stringent requirements for developers, contractors
and suppliers to put green credentials at the heart of any construction activity 7.
Decarbonisation of construction
Efforts to decarbonise the construction sector are generally focused on two main avenues:– Reductions in operational carbon, such as improving the energy efficiency ofheating and cooling.
– Reductions in embodied carbon, including energy used to extract and processbuilding materials, assemble and transport components, construct, maintain,
deconstruct and dispose of buildings, as well as the lifetime carbon footprintof the materials used.
The carbon lifecycle of a building

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World Green Building Council - The net zero Carbon Buildings Commitment | World Green Building Council (worldgbc.org)
The Explorer - Norway is greening the construction industry - The Explorer

Lloyd's. Insuring a sustainable, greener future3. Greener Industry

3. Greener Industry
Key obstacles and role of the insurance industry
Evolving construction and property risk landscapeThe shift towards using more sustainable materials, new construction methods and energy
sources has significant implications for the risk profile of a building, which need to beunderstood and priced appropriately by insurers.
Building standards are continuing to evolve, with construction firms increasingly seeking toutilise more sustainable materials and manufacturing techniques, in some cases with theultimate ambition of achieving net zero carbon-building accreditation. Use of suchsustainable materials is likely to introduce additional risk factors; for example, concernsthat some sustainable materials, including insulation materials, timber-based cladding,laminate timber and green roofing, may be more flammable than traditional materials. The
repair risks associated with green buildings and/or sustainable materials can also be very
specific and costly to resolve, particularly where sustainable materials may be less durable
than traditional alternatives.
Increased awareness of the risks associated with these building methods will be crucial toensure challenges are properly managed and to improve the resilience of the built
environment to these risks. Many property developers are exploring new technologies
such as “Internet of Things” (IoT) devices to help understand their buildings’ risk profiles
and drive energy efficiency savings through improved consumer habits. Through working
with customers, insurers can also help customers to understand the mutual benefits ofsuch devices, such as through supporting early detection of issues which may lead toinsurance claims, and help to accelerate their expansion.
Alternative construction methods such as offsite modular construction are growing rapidly.
Such construction typically results in increased emphasis on the need for quality control at
an early stage of the design process, and increased scrutiny on the interoperability ofmodular building materials with other construction materials, often resulting in a positive
impact from a risk perspective on the safety of construction sites.
A key barrier to construction method innovation is the low profit margins typically achievedby construction companies, which tend to range between 2% and 8%, making it difficult forcompanies to invest in the critical technology required to innovate 8.
Changing the energy source of a building also changes its risk profile. The UK Climate
Change Committee estimates that around 34% of reductions in carbon emissions within
the property sector come from energy efficiency measures, with a growing share
attributed to low-carbon heating 9. The UK Climate Change Committee has recommended
the phase out of high-carbon fossil-fuel and gas-powered boilers in new homes,commercial and public buildings from 2025 10.

8 Designing Buildings - Top 4 challenges facing the construction industry - Designing Buildings Wiki
9 The CCC - Sixth Carbon Budget - Climate Change Committee (theccc.org.uk)
10 HM Government - The Ten Point Plan for a Green Industrial Revolution (publishing.service.gov.uk)
Lloyd's. Insuring a sustainable, greener future

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3. Greener Industry

3. Greener Industry
If these changes to property and construction risks are not understood and managed
properly, this can create significant challenges and costs for both insurers and customers.
For example, following the Grenfell fire in the UK, the UK building sector experienced asurge in insurance costs, with insurers also increasingly excluding materials such as
cladding from professional indemnity policies 11. This creates a potential protection gap,
acting as a significant deterrent to investment in innovation around greener building
materials. Insurers will need to find the balance between providing insurance products thatare reflective of the changing risk profile, at a premium which is not prohibitively expensive
for new building owners and the construction industry.
The global insurance industry should leverage its data and claims experience to identify
crucial gaps in property resilience and ensure these are addressed appropriately, and workwith material scientists to properly understand the risk implications. Some insurers aretaking steps to get closer to the design phase of buildings to support these challenges.
However, given the lack of historic data for new materials and resulting reluctance from themarket to provide coverage for certain materials (e.g. timber-based cladding), there could
be a role for public-private partnerships to obtain the level of coverage required to facilitate
growth of these materials on a meaningful scale.
Decarbonisation of the existing property stock
A key challenge for the sector is the decarbonisation of existing property stock; around
80% of current UK homes for example will still exist in 2050, therefore there is a significant
emphasis not just on new construction but also on retrofitting to improve energy efficiency 12.
Costs and supply chain capacity are key challenges to retrofitting, for example to provide
low-carbon heat pumps to existing homes. This challenge is compounded by the balanceof policy costs between electricity and gas, which could make low-carbon options lesscompetitive, as well as a potential lack of clarity as to who will bear the cost of retrofitting
existing building stock. As a result, incentives to innovate and reduce the carbon footprintof a building beyond what is required by legislation are limited, with retrofitting activities
most likely to occur only during major building alterations.
The insurance industry can support with encouraging greater investment indecarbonisation initiatives through adapting insurance products. For example, more readily
including green and / or ‘build back better’ clauses within property wordings can help toensure that damaged properties can be rebuilt to standards aligned to a net zero transition.
This is similar in concept to ‘building ordinance and law coverage’ present in many property
insurance policies, which pays for the additional cost of upgrading property to meetcurrent building regulations.
The industry also has an opportunity to proactively lead the transition, for example byoffering policy incentives for clients who decrease the carbon footprint of their home.
There is precedent on which insurers can build – for example, many insurers haveexperience of providing credits to customers who have fitted freeze detection devices andwater flow sensors on their pipes. However, it is important that such solutions are balancedwith an assessment of risk to ensure they do not lead to increased claims exposure if they
are not reflective of the new risk profile.

11 Reuters - UK building sector hit by surge in insurance costs after Grenfell fire | Reuters
12 Wired - The climate crisis issue that no one is talking about? Your gas boiler | WIRED UK
Lloyd's. Insuring a sustainable, greener future

193. Greener Industry

20

3. Greener Industry
Commonretrofitting
activities
for building
existingstockbuilding stock
Commonretrofitting
activities
for existing

Upgrade energy
and water
systems to reduce
consumption

Optimize recyclingof demolition debris
and construction
waste

Replace existing
windows withhigh-performancewindows

Consider energy
using daylightand light sensors

Considerusing a cool roof
or green roof

Consider naturalventilation to reduceheating/coolingloads

Use a rating system(e.g. LEED) togauge the building’s
performance

12 Wired - The climate crisis issue that no one is talking about? Your gas boiler | WIRED UK
Lloyd's. Insuring a sustainable, greener future

Investigate
renewableenergy options

Install meters forutilities to monitor
real-time
consumption

3. Greener Industry

21

3. Greener Industry
Roadmap for action
The shift towards using more sustainable materials, new construction methods
and alternative energy sources has significant implications for the risk profile of abuilding, which insurers will need to understand. Insurers should explore how toincentivise customers to lower the carbon footprint of their building(s), and/or
more readily introduce 'build back better' wordings in policies. This should bebalanced with understanding the risk profile of sustainable materials and new
construction techniques, to ensure that the application of these does not
ultimately result in increased claims exposure.
Through its role as Chair of the SMI Insurance Task Force, Lloyd’s has:– Convened a workstream dedicated to developing and launching an industry-wide
framework for greener insurance supply chains to drive sustainable outcomes forcustomers, including through claims processes.
In addition, Lloyd’s will:– Conduct targeted research to understand the risk profile of new construction
materials and techniques, exploring the insurance implications and opportunities
for new or evolved risk solutions.

Lloyd’s and Marsh’s commitment to addressing the protection gap for
new construction materials and technologies
Lloyd’s and Marsh are collaborating on a solution to managing innovation risks
in construction through a test and learn strategy.
Lloyd’s and Marsh will work closely with an insured party (a large construction
company) and its broker to scientifically assess the risk characteristics of a newmaterial or technology. Following an initial research period, coverage for thematerial will be offered by the market for a limited time, with pricing agreed onrisk-based rates.
This experimental approach will provide the required data and knowledge toaddress the coverage gap in the longer term, forming the basis for new products
which can be offered by the market.

Key:

The global insurance industry

Lloyd's. Insuring a sustainable, greener future

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3. Greener Industry

3. Greener Industry
3.2 Green FinanceIntroduction
Unlocking capital to support the development of new industries and technologies is vital toenable the transition towards a low-carbon economy. Green finance initiatives aim tosupport the flow of capital into assets which support positive outcomes for theenvironment and society. These initiatives are not necessarily restricted to climate-relatedareas but can be much broader in scope to generate material societal benefits. A numberof industry bodies in this space are helping to drive change including the Green FinanceInitiative and the UN Principles for Sustainable Insurance, whilst several insurers aremaking impact and long-term value investing central to their purpose.
What is the role of the global insurance industry?
The investments which insurers make are critical to supporting sectors with theirdecarbonisation objectives, and there is a need to accelerate efforts to direct capital
towards climate-positive solutions and products.
There is clear demand from the global insurance market to deploy capital into green
investments, with in-flows to such investments increasing significantly in recent months.
Morningstar recently reported that global in-flows into sustainable funds reached $80.5bn
in the third quarter of 2020, with sustainable fund assets reaching $1.2tn globally 13. The
Lloyd’s market has substantial capital at its disposal (c.£85 billion 14), demonstrating there isa significant opportunity for the Lloyd’s market to make a positive impact through directing
capital towards green investments.
What actions can be taken to accelerate the flow of capital into green investments?
The insurance industry is taking steps to support the flow of capital into green investments
through the use of different levers:– In the first instance, applying exclusions is seen as an effective approach to shifting
investments away from particularly carbon-intensive sectors, however it does forego
the opportunity to engage with corporates involved in such sectors on their respective
transition pathways.
– We are starting to see investors complement exclusion policies with structured voting andengagement activities, particularly in the equities market. Insurers have a role to play inhelping industries with their transition and leveraging their influence as a capital provider
to put pressure on companies around the actions they are taking to support
decarbonisation.
– The integration of ESG (environmental, social and governance) factors can help toembed non-quantifiable risks into the investment decision making process and support
identification of opportunities to actively invest in corporates and sectors critical to
the transition.
– Some insurers are actively making ‘impact’ investments, which are investments
made with the intention to generate positive, measurable social and environmental
impact alongside a financial return. This is a way in which the industry can therefore
take affirmative action to proactively invest in parts of the economy that are actively
decarbonising.
13 Sustainable assets reach $1.2 trillion in Q3 | ESG Investing
14 Lloyd’s of London proprietary market data (accessed 30 March 2021)
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3. Greener Industry
There are several challenges to overcome to increase insurance investors’ allocation togreen assets. This includes the availability of such assets to achieve the necessary scale
to drive the low carbon transition, a consistent taxonomy to define “green”, and data
availability to test the green credentials of assets. A strong understanding of thecontribution of different sectors towards decarbonisation pathways will be crucial, in order
toSpectrum
ensure investments
are directed towards the parts of the economy where they will haveof Capitalthe greatest positive impact.
Spectrum ofcapitalFinancial Only

Responsible

Sustainable

ImpactPhilanthropy

Accept lower
risk-adjusted
financial returns

Delivering competitive risk-adjusted financial returns

Accept partial
capital preservationor full loss of capital

Mitigating Environmental, Social and Governance (ESG) risks
Pursuing Environmental, Social and Governance opportunities
Focusing on measurable high-impact solutions

Focus:

Limited or
no regard forenvironmental,social or
governance(ESG) practices

Mitigate risky
ESG practices
in order toprotect value

Adopt
progressive
ESG practices
that mayenhance value

Address
societalchallenges
that generatecompetitive
financial
returns forinvestors

Address
societalchallenges
where returns
are as yet
unproven

Address
societalchallenges
that require abelow-market
financial
return forinvestors

Green finance initiatives within the Lloyd’s market
Recognising the acceleration of activities across the global insurance industry inthis space, the Lloyd’s market has taken positive steps through its recent commitments.
This includes the allocation of 5% of the Corporation of Lloyd’s Central Fund to impact
investments by 2022, the phase out of new investments in thermal coal-fired power
plants, thermal coal mines, oil sands and new Arctic energy exploration activities, and thecommitment to develop guidance on impact investing to support participants in the Lloyd’s
market to create their responsible investment strategies.
Lloyd’s market participants typically invest in shorter-dated assets, in line with respective
liability profiles. It is therefore unrealistic to expect the Lloyd’s market to invest substantiallyin long-dated assets such as infrastructure loans, for example, however there is still a
considerable universe of shorter-dated green investments which also satisfy the market’s
broader liquidity and solvency requirements.
These activities are, in part, driven by a number of broader initiatives seeking to accelerate
the drive towards greener finance. For example, as part of the United Nations-convened net
zero Asset Owner Alliance, 35 institutional investors including insurers, representing $5.5
trillion assets under management 15, have pledged commitment to transitioning theirinvestment portfolios to net zero GHG emissions by 2050. In addition, signatories to theUN’s Principles for Responsible Investment have committed to a set of investment principles
and associated actions for incorporating ESG issues into investment practice.

15 UN-convened net zero Asset Owner Alliance – Introduction to the Alliance
Lloyd's. Insuring a sustainable, greener futureAddress
societalchallenges
that cannot
generatea financial
return forinvestors

3. Greener Industry

24

3. Greener Industry
Lloyd’s case study
The Corporation of Lloyd’s is exploring a range of investments as part of its allocation to
impact investing, and groups such investments into three key categories: green bonds,
social bonds and sustainable investments. Examples of each include:– Green: The Corporation invested in an International Development Association (IDA) bond,the proceeds of which will support the financing of green projects and programs in eligible
IDA countries to advance Sustainable Development Goals. This offers investors anefficient way to contribute to development in the world’s poorest countries.
– Social: The Corporation invested in a social bond issued by the National Australia Bank,
which is aligned to the International Capital Market Association’s Social Bond Guidance.
Proceeds are earmarked for (re)financing a portfolio of organisations across Australia that
hold the Employer of Choice for Gender Equality citations from the Workplace Gender
Equality Agency.
– Sustainable: The Corporation invested in a sustainable bond whose proceeds areallocated to (re)finance existing and/or future projects or businesses which meet eligibility
criteria as defined in the issuer’s sustainability bond framework. This framework,
developed post the outbreak of COVID-19, has been expanded to focus on climate change
mitigation, disaster resiliency, healthcare and social well-being.
Roadmap for action
The insurance industry has a significant opportunity to direct capital towards
climate-positive solutions and products. It can achieve this through actively
integrating ESG factors into the investment decision making process, proactively
making impact investments into areas of the economy which are actively
decarbonising and excluding investment from particularly carbon-intensive
sectors which are failing to commit to the transition.
There is also a significant opportunity for the global insurance industry to
collaborate with investors and governments to provide financing structures tosupport disaster resilience, response and recovery in developing countries.
Through its role as Chair of the SMI Insurance Task Force, Lloyd’s has:– Convened a workstream focused on supporting and encouraging moresustainable investment. In 2021, the workstream will develop a framework foraccelerating and scaling sustainable investment, to help unlock the global
insurance industry’s more than $30tn in assets under management, increasingly
directing capital towards investments that drive climate-positive outcomes inboth developed and developing nations.
– Convened a workstream dedicated to establishing a public-private disaster
resilience, response, and recovery framework to help protect developing
nations from the evolving economic and societal impacts of climate change,
including the effects of increasingly frequent and severe weather events. The
framework will combine an insurance product with risk management and loss
recovery services. Lloyd’s, as part of the SMI, will work closely with key
stakeholders including insurers, governments, aid agencies and data providers
to deliver a pilot scheme in 2021.
Key:The global insurance industry

Lloyd's. Insuring a sustainable, greener future

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4. Greener Transport

4. Greener Transport

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4. Greener Transport

4. Greener Transport
4.1 Jet Zero
Introduction
Aviation is one of the fastest-growing sources of global GHG emissions, with directemissions from aviation accounting for 2.4% of global emissions in 2018 and pre-COVID-19
forecasts from the International Civil Aviation Organisation suggesting that emissions could
triple by 2050 16.
International collaboration will be key to achieving decarbonisation of the aviation sector,
and Destination 2050, a European aviation sustainability initiative, is one of a number ofglobal/regional groups to set the ambition for all flights to be net zero by 2050 through a
combination of improvements in aircraft and engine technology, operational improvements,
use of sustainable aviation fuels and carbon removal projects 17. The European Green Deal
sets out the need to reduce transport emissions by 90% by 2050 (compared to 1990
levels) 18, and the aviation sector, as the second largest source of transport emissions afterroad transport, will have a vital role to play.
Global carbon markets are recognised as an important decarbonisation enabler. For
example, the International Civil Aviation Organisation’s Carbon Offsetting and Reduction
Scheme (CORSIA) is a market-based mechanism for carbon offsetting which was agreed
by the UN, with 78 countries participating in a voluntary pilot phase from 2021 representing
75% of international flights 19.
The aviation industry has already seen significant evolution over recent years driven by
the desire to create faster, lighter and more fuel-efficient aircraft, which ultimately delivers
commercial benefits through lower costs. For example, the use of next-generationmaterials such as carbon fibre, combined with changes in aircraft design to make aircraft
more aerodynamic, have delivered significant emissions savings with the amount of fuelburned per passenger reducing by 24% between 2005 and 2017. However, this has
been accompanied by rapid growth in passengers of 60% across the same period, with
the net result that direct emissions from aviation in 2017 accounted for 3.8% of total
global CO2 emissions 20.
Key challenges
Challenges from COVID-19
The primary focus of the aviation industry in the short term is on restoring and maintaining
viability due to the significant challenges resulting from COVID-19. According to recent
analysis, passenger levels are not projected to return to pre-pandemic levels until 2024,
and several European airlines have ceased operations as a result of the challenges 21.
Baselines for carbon offsetting set by the CORSIA scheme were adjusted in light of
COVID-19, increasing the baseline by around 30% and signalling the importance of
supporting recovery ahead of pursuing net zero targets in the immediate term 22. As such,the industry at present has limited capital available to commit to new technologies andinnovation to support longer term decarbonisation objectives.
16	
The International Council on Clean Transportation - CO2 emissions from commercial aviation, 2018 |International Council on Clean Transportation (theicct.org)
17 GOV.UK - Prepare for lift-off: Jet Zero Council to deliver carbon-free flight - GOV.UK (www.gov.uk)
18 European Commission Mobility and Transport – Sustainable transport
19 Carbon Brief - Corsia: The UN’s plan to ‘offset’ growth in aviation emissions (carbonbrief.org)
20 Europa - Reducing emissions from aviation | Climate Action (europa.eu)
21 International Air Transport Association - IATA - Recovery Delayed as International Travel Remains Locked Down
22 Financial Times - Grounding a global fleet: Boeing faces its greatest challenge | Financial Times (ft.com)
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4. Greener Transport

27

4. Greener Transport
The challenges posed by COVID-19 for the aviation sector follows a long sequence ofdisasters for airlines, including the Boeing catastrophes and subsequent grounding of the
Boeing 737 Max fleet 23. This series of events has resulted in a challenging environment for
the insurance industry, with some providers withdrawing from the market.
Nevertheless, the aviation sector is still incentivised to accelerate the low carbon transition,with consumer pressure and broader societal expectations pushing operators towards low
carbon means of transportation. As the sector emerges from the pandemic and looks
towards opportunities for a green recovery, we expect to see a collective industry pivot
towards the advancement of new technology to support decarbonisation.
Pathways to decarbonisation
The use of sustainable airline fuels (SAF), including biofuel and synthetic fuels, to replacefossil-fuel based jet fuel, could achieve up to a 32% reduction in emissions from the UK
aviation industry by 2050 according to estimates from UK Sustainable Aviation 24. Biofuels
rely on residues (e.g. used oils and waste) or biomass (e.g. plant products) for production,
the latter requiring significant land use. Conversely, synthetic fuels have the potential to be
zero-carbon if renewable energy is used in the production process.
Globally SAF is nearing a tipping point, with several projects on the verge of commercialscale production, and fourteen airports now supplying sustainable aviation fuels, albeit inlow volumes 25. However, a key constraint on the development and commercialisation of
SAF on a meaningful scale is the need for an integrated transition. The key challenge which
remains is the need to ensure new supporting infrastructure such as re-fuelling capabilities
is globally available, and fuel types are globally certified to facilitate re-fuelling at different
locations. It will be also be vital that there is collaboration between airlines, airports,
aerospace manufacturers and infrastructure providers to enable a co-ordinated transition.
Given that aviation emissions are largely recognised as belonging to the airline rather than
airports, in the absence of partnerships there is limited incentive for airports to invest in thenecessary infrastructure to support this change.
Sustainableaviation fuels

1

Feedstock is collected such as household waste
or waste oils.

2

Feedstock is converted tosustainable aviation fuel.

From Waste to Wingtip The Production Journey for
Sustainable Aviation Fuel (SAF)
Using SAF can reduce lifecycle carbon
emissions by up to 80% compared to3

Traditional jet fuel is blended withsustainable aviation fuel to make it

the traditional jet fuel it replaces.

suitable for use in aircraft.

4

Fuel is delivered to airport
and into wing.

23 Financial Times - Grounding a global fleet: Boeing faces its greatest challenge | Financial Times (ft.com)
24 Sustainable Aviation - SustainableAviation_FuelReport_20200231.pdf
25 Sustainable Aviation - SustainableAviation_FuelReport_20200231.pdf
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4. Greener Transport
Fleet optimisation can also play a significant role in delivering carbon reductions for theaviation industry, through a combination of operational optimisation, aircraft design andnew engine efficiency improvements. In the medium term, hybrid-electric aircraft, whichtake advantage of batteries or hydrogen fuel cells, could replace conventional turbine
powered planes, especially on smaller aircraft and shorter flights 26. However, as with all
new technologies, there remain technical obstacles to navigate, for example storage
complexity and how best to balance the use of low energy density batteries with theadditional weight that this introduces. This means that in the short-term jet-fuel willcontinue to be required for long-distanced commercial operations.
National governments have several policy actions at their disposal which could drive ashift in passenger demand and consequently reduce carbon emissions. This could consistof a combination of carbon pricing, frequent flier levies, fuel duties and VAT, which all havethe potential to alter incentives and reduce the number of annual airline passengers.
International market-based mechanisms such as CORSIA’s carbon off-setting schemeand the EU Emissions Trading System are also a key part of the comprehensive approachrequired to reduce emissions in the aviation industry beyond what can be delivered bytechnological and operational measures alone 27.
Implications of new technologies and fuels on the aviation risk landscape
Recognising that these factors are key to enable the low-carbon transition of the aviationindustry, the biggest constraint on decarbonisation is the capital investment required tofacilitate the industry’s transformation. The need for significant changes to jet engine,
aircraft and supporting infrastructure design to allow the use of alternative fuels or
hybrid technologies, presents substantial upfront capital costs. Furthermore, such newtechnology, including hybrid-electric aircraft and sustainable aviation fuels, is also likely
to introduce increased complexity and potential safety implications which could hinder
private investment into these technologies.
Any modifications to the way in which an aircraft operates, and the infrastructure needed
to service such new technology, will in turn have an impact on the risk landscape. There
will therefore be a key dependency on the insurance industry to be able to understand andrespond to increased demand for new or adapted insurance coverage and linked risk
management solutions, to encourage investment and facilitate this transition.
The key challenge which insurers will face is the need to find the balance between
providing cover that is reflective of the risk profile of new technology and availability ofhistoric data, at a premium that is not prohibitively expensive for the aviation industry. Lossdata for new technologies is usually very limited, however it is important to recognise thatthe aviation industry has experienced significant changes over recent years with fleet
renewal and introductions of new-age aircraft, and insurers have been able to overcome
the challenges of a lack of historic data. For example, the insurance industry is currently
providing insurance to a selection of prototypical developments, including commercial
spacecraft, hydrogen-powered aircraft and autonomous air ships.

26 IATA - technology20roadmap20to20205020no20foreword.pdf (iata.org)
27 Europa - Market-Based Measures | European Aviation Environmental Report (europa.eu)
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29

4. Greener Transport
There has also been a strong correlation in the aviation industry between aircraft
innovation and improvements in safety. The industry’s excellent health and safety focus,
combined with the fact that aviation is a heavily regulated sector, has alleviated someconcerns around potential risks.
Early signals from the insurance market show appetite to support the aviation industry
through its transition and to provide the specialist insurance coverage required. A strong
partnership already exists between the aviation industry, regulators and insurers, and thispartnership will be pivotal if rapid innovation and an acceleration of the decarbonisation
pathway is to be successful.
Roadmap for action
As the aviation and marine sectors accelerate their efforts to drive sustainability
through advancements in technology and alternative sources of fuel,opportunities will emerge for the insurance industry to support theirdecarbonisation pathway. Insurers should understand the risk implications oftechnological advancements, including resulting changes in infrastructure suchas fuel transportation and storage, to ensure that cover is made available for
emerging and alternative marine and aviation risks at the moment it is needed.
To support and drive innovation across the aviation and maritime sectors, theSMI Insurance Task Force will:– Work closely with the SMI Aviation and Shipping task forces to open up
discussion with customers embarking on research and development in this area
to identify requisite insurance coverage for emerging risks and new technologies.
In addition, to support and accelerate the growth of greener maritime, Lloyd's will:– Provide a platform for dialogue between customers and insurers operating in thisspace to understand the specific challenges customers are facing and develop
insurance coverage for emerging risks, in particular those associated withretrofitting of the global fleet to drive operational efficiency.

Key:The global insurance industry

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4. Greener Transport

4. Greener Transport
4.2 Greener Maritime
Introduction
There is significant international dependence on shipping to facilitate world trade and,according to a study by the International Maritime Organisation, carbon emissions fromshipping could increase between 50% and 250% by 2050 28. The maritime industry moves
approximately 80% of world trade by volume, therefore, as the world moves towards a
low-carbon economy there will be an increasing need for the shipping industry totransition, not only due to direct emissions but also to help other industries decarbonise
their supply chains 29.
Per tonne of goods moved, the shipping industry is the most efficient way to moveproducts 30. This has been driven in large part by containerisation, allowing more goods tobe transported with fewer journeys and reducing the time required to load and unload
vessels. In addition, a larger volume of local distribution centres has also driven efficiency,with the COVID-19 pandemic accelerating the localisation of supply chains.
However, whilst efficiency has improved, the vast majority of ships are powered by
combustion engines which are a significant emitter of GHG emissions and contribute toair pollution in congested port locations. Moreover, regulation of maritime emissions is
uniquely challenging because of the international cooperation required in setting limits,and the difficulty of global enforcement.
Global targets for decarbonisation
The International Maritime Organisation (IMO) has set clear global targets for reducing theshipping industry’s GHG emissions by at least 50% by 2050 (compared to 2008 levels) 31.
To meet these targets close collaboration and deliberate collective action will be required
between the maritime industry, the energy sector, the financial sector and government, to
set up the infrastructure that will be needed to support this transition.
The global insurance industry is well-placed to play its part, and can draw on thecritical role it played in helping clients to meet the introduction of the IMO’s sulphuremissions regulations in 2020 as a successful example of coordinated action acrossthe marine sector.
Key challenges
Maritime insurance landscape
Marine insurance is one of the oldest classes of business and is the foundation blockon which Lloyd’s of London is established. Typical insurance policies provide cover forphysical loss or damage, split across hull (covering damage to the vessel, propulsion
machinery and equipment used for activities such as cargo handling), cargo (loss ordamage to freight), fine art and specie (high-value goods), liability (including personal
injuries, pollution and collision) and yacht insurance.

28 European Commission - Reducing emissions from the shipping sector | Climate Action (europa.eu)
29 UNCTAD - Review of Maritime Transport 2018 | UNCTAD
30 Modes of Transportation: What method is best for cargo and freight? (forto.com)
31	Shell - https://www.shell.com/promos/energy-and-innovation/decarbonising-shipping-all-hands-on-deck/_jcr_content.
stream/1594141914406/b4878c899602611f78d36655ebff06307e49d0f8/decarbonising-shipping-report.pdf
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4. Greener Transport

31

Insurance

4. Greener Transport
Types of marine insurance

Types of Marine Insurance

Hull

Cargo

Covers damage to

Covers loss or

the vessel, propulsion

damage to freight.

Fine Art& Specie

Liability

Yacht

Includes personalSpecialist cover for

Covers loss or

injuries, pollution

private, commercial andmachinery and equipment

damage to highand collision.

competitive racing yachts

used for activities suchvalue goods.

as cargo handling.

Global marine insurance premiums are c.£21bn per year, £4bn of which is cover obtained
through the Lloyd’s market 32. The two main drivers of the marine market are cargo and hull,and it is these two areas that will likely be most impacted by the coming changes to how
ships are powered and fuelled.
New technologies to drive operational efficiency
Reductions in GHG emissions can be made in the maritime sector through operational andtechnological improvements to drive efficiency, and offer an essential short-term bridge
whilst more complex solutions such as low carbon fuels are developed in the medium term.
For example, air lubrication technology is being deployed on eight of Shell’s ships, whichis expected to deliver a 5-8% reduction in fuel consumption 33. In addition, operational
improvements such as speed adjustments can also deliver emission reductions, and smart
port technologies are being explored to enhance co-ordination between ship and port call
activities to optimise voyage speeds.
The introduction of new technologies is expected to present a range of enhanced
environmental, health and operational risks. It is vital that insurers stand ready to supportclients in the sector with the insurance cover it needs as new technologies emerge. The
insurance market is starting to innovate in this space, for example through leveraging
artificial intelligence techniques to analyse voyage planning and cargo optimisation data,
to better understand the evolving risk landscape.

32 Lloyd’s of London marine sector data (accessed 29 March 2021)
33 Shell - Decarbonising Shipping: Setting Shell's Course
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including hull, liability andpersonal belongings.

4. Greener Transport

4. Greener Transport
Insuring future marine fuels
Though operational improvements play an important role in supporting the reduction ofmaritime emissions, it is widely recognised that in the longer term, the use of low carbon
fuels is the biggest opportunity for the maritime industry to transition towards net zero.
Some projections indicate that developing and implementing a sustainable shipping fuelwould drive as much as 87% of future emissions savings in this sector 34.
To enable the transition to a low carbon economy, commercially viable zero-emission
vessels must start entering the global fleet by 2030 35. Currently there is no single fuelsource that is universally agreed to be the ‘right’ maritime fuel of the future, with fuelssuch as biofuel, liquid natural gas, and hydrogen being explored. A ‘poly-fuel’ scenario
may emerge across different shipping segments, for example electrification may work for
short voyages including ferries and cruise ships however it may be less appropriate fordeep-sea shipping.
Before alternative fuels can be used on a meaningful scale, a significant amount of
infrastructure needs to be developed globally to enable transportation and storage offuels, both onshore and offshore. According to University Maritime Advisory Services,
infrastructure development costs to support alternative fuels are estimated to be between$1-1.4 trillion, presenting a significant barrier for the sector 36. Additional challenges are
posed by logistics and scale; for example, current total global capacity for bio-methanol is
only 100 million tonnes annually to serve multiple purposes, of which a single shipping
company such as Maersk would require approximately 10% to power its fleet for one year 37.
The insurance industry must remain close to developments in alternative fuels as the future
fuel pathway for the sector becomes clearer. Each of the possible alternative fuels for thesector introduce important risk considerations, including for example:– The use of hydrogen (and ammonia as a vehicle for storing and transporting hydrogen)poses enhanced safety risks due to flammability and corrosive properties.
– Biofuels have been found to cause potential damage to ship engines which could impact
operational performance 38.
– The potential release of GHGs such as methane from the combustion of liquefied naturalgases would need to be appropriately managed.
– The use of low carbon nuclear power propulsion using liquid fuelled micro-reactors is
a potential medium-term solution, and naturally gives rise to unique safety andoperational risks.
Whilst the future fuel scenario is still uncertain, what is evident is that insurance products
and risk management solutions will need to be developed to support the industry’s
transition and anticipate both interim and longer-term needs. This includes supporting thedevelopment of new fuelling infrastructure, helping ports manage their emissions both
onshore and offshore, and supporting with revisions to cover for the retrofitting of a global
fleet to reflect engine modifications and changing fuel storage requirements.

34 The CCC - Sixth Carbon Budget - Climate Change Committee (theccc.org.uk)
35 Global Maritime Forum - Getting to Zero Coalition (globalmaritimeforum.org)
36 Bloomberg Quint - What’s the Green Fuel of the Future for Shipping? (bloombergquint.com)
37 Indicative calculation based on Maersk Sustainability Report 2020
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4. Greener Transport

33

Climate Action Infographics

4. Greener Transport
Alternative Fuels Comparrison

Alternative
aviation fuelsin development

Carbon Fuels

Advantages
Global Fuel

Long-Term

Established

Safe toHigh Fuel

Increased

Availability

Solution

Infrastructure

Handle

Cost

CAPEX

Disadvantages

Liquified Natural Gas (LNG)

Clean fuel and a rapidly
developing infrastructure

Liquified Petroleum Gas (LPG)

Low CO2 emissions

Methanol / Ethanol

Easy-to-handle, welldeveloped terminal oil

Biofuels / Biomethane

Increasingly used as marine
fuel, can be used as
drop-in-fuelSustainable scaling up needed

Synthetic Methane (SNG)

Easily adapted to LNG
infrastructure, can beused as drop-in-fuelLarge-scale production
challenges, requires
renewable energy source
to be carbon neutral

HydrogenLow energy density pervolume and favourable
specific density by mass

Storage challenges,
particularly flammable

Ammonia

Solution for internal
combustion engine
and fuel cells

Carbon Neutral

Zero Carbon

Methane slip

Limited bunkering, toxic

Roadmap for action
0.4

Key:

Lloyd’s Infographics

As the aviation and marine sectors accelerate their efforts to drive sustainability
through advancements in technology and alternative sources of fuel,opportunities will emerge for the insurance industry to support theirdecarbonisation pathway. Insurers should understand the risk implications oftechnological advancements, including resulting changes in infrastructure suchas fuel transportation and storage, to ensure that cover is made available for
emerging and alternative marine and aviation risks at the moment it is needed.

The global insurance industry

Lloyd’s in its role as Chair of the SMI Insurance Task Force

38 European Parliamentary Research Service - Decarbonising maritime transport: The EU perspective (europa.eu)
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4. Greener Transport

4. Greener Transport
4.3 Electric Vehicles
Introduction
The shift towards electrification and alternative propulsion systems
The transportation sector contributes 24% of global carbon emissions (as at 2019) 39 andwithin that road transportation (including cars, trucks, buses and two- and three-wheelers)
is the biggest contributor. It is unsurprising therefore that the electrification of theautomotive industry and the development of the supporting infrastructure requiredfeatures prominently in the decarbonisation pathways of many countries.
Today, China is leading the electric vehicle market, accounting for the largest share (40%)
of global sales of electric vehicles (EVs). We are, however, starting to see rapid growth inother regions including Europe and the US 40. Projections by BloombergNEF suggest thatthe global EV fleet could reach 116 million by 2030 from 8.5 million today 41. In the UK, theNational Grid suggests that the UK stock of electric vehicles could reach up to 10.6 million
by 2030 and could increase to as high as 36 million by 2040, representing over a third of
the total UK vehicle stock 42.
There are a range of low or zero carbon propulsion systems offering more carbon efficient
alternatives to traditional combustion engines, including electric batteries, fuel cells andrenewable biofuels. In the near and medium term, battery driven electric vehicles are
expected to see significant rates of growth 43. Hydrogen fuel cell vehicles represent analternative solution, in particular for commercial vehicles carrying heavier loads or driving
longer distances, though challenges remain including accommodating heavy onboard
storage systems, fuel cell durability and reliability in extreme weather, and establishing therequisite network to produce, transport and dispense hydrogen to consumers 44.
The transition to more carbon efficient propulsion systems is being supported by rapidly
accelerating customer demand as well as regulatory change. As a result, participants inthis sector are competing to rapidly gain market share across the value chain, including inelectric vehicle (EV) production, smart charging solutions, electric charging infrastructure,and innovative vehicle to grid solutions.
In parallel the popularity of diesel and petrol cars is declining rapidly, driven in part by
new regulations and standards such as the expansion of low emission zones, as national
governments look to reduce noise and air pollution in densely populated areas. To date,
17 countries have announced plans for the phase out of internal combustion engine
vehicles through to 2050, including setting targets for 100% zero-emission vehicles 45.
For example, the UK Government has stated that all new vehicles will be required to havesignificant zero emissions capability from 2030 and be 100% zero emissions from 2035 46.
Up to £1 billion has been committed by the UK Government to support the electrificationof UK vehicles and their supply chains, recognising the key reliance on supporting
infrastructure to be able to facilitate this transition.
39 International Energy Agency - Tracking Transport 2020 – Analysis - IEA
40 Forbes - Plugging Into The Future: The Electric Vehicle Market Outlook (forbes.com)
41 BloombergNEF - BNEF EVO Report 2020 | BloombergNEF | Bloomberg Finance LP
42	UK Parliament - Electric vehicles: driving the transition - Business, Energy and Industrial Strategy Committee House of Commons (parliament.uk)
43 BloombergNEF - BNEF EVO Report 2020 | BloombergNEF | Bloomberg Finance LP
44 Fuel Cell Vehicles: Challenges (fueleconomy.gov)
45 International Energy Agency - Global EV Outlook 2020 – Analysis - IEA
46 HM Government - The Ten Point Plan for a Green Industrial Revolution (publishing.service.gov.uk)
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4. Greener Transport
Electric vehicle ecosystem

MiningBattery

Automobile

Processing battery grade lithium

Battery cell manufacturing

Design and production of EV platform

Exploration and extraction

Storage solutions for EV integration

EV based (mobility) subscription services

Cathode processing

Battery module and pack manufacturing

Production of EV components

Battery pack assembly

After-sales services of EVs

Battery recycling

EV fleet management

Battery servicing

EV retails

Charging Infrastructure

Networks

Customer Suite

Charger manufacturing

Electricity retail

Battery leasing

Public charging stations

Network optimisation

EV financing and leasing

Portable charging solutions

Metering and billing management systems

Point of interest (PoI)

City/grid planning and assessment

eRoaming services

Home/community charging solutions
Battery swapping stations

On the commercial side, manufacturers and large fleet operators are accelerating theirinvestments in EVs as part of their long-term climate commitments, as well as to meetnear-term policy requirements. Over 20 companies with operations in the UK have now
committed to fully electric fleets by 2030, including the UK’s four biggest fleet operators:
BT, Centrica, DPD UK and Royal Mail 47. Heavy-duty road freight has experienced faster
growth than other modes of road transportation due to increased demand for goods,
therefore this segment of the market plays a vital role in the decarbonisation of thetransportation sector 48.

47 The CCC - The-UKs-transition-to-electric-vehicles.pdf (theccc.org.uk)
48 IEA - Tracking Transport 2020 – Analysis - IEA
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Key obstacles and role of the insurance industry
The shift towards electrification and alternative propulsion systems
In order to accelerate growth in the use of EVs, there is a significant reliance on theinfrastructure transformation to facilitate this growth, particularly charging infrastructure
across a broad range of locations including motorways, streets and private charging points.
This will be a key driver of consumer demand for EVs going forwards, with a particularfocus on the speed at which batteries can be charged, capacity of batteries to cover long
distances, and cost. As of April 2020, there were approximately 18,000 public charging
points in the UK, however projections by the UK Government Climate Change Committee
estimate that nearly 325,000 will be needed by 2032 in order to grow the UK’s EV fleet to23.2 million by 2032 49.
Infrastructure availability is also a significant barrier to success for commercial fleet
electrification. Corporates can incur significant charging infrastructure installation costs,
and the scale of infrastructure may introduce limits on their operating models and capacity
planning, for example through integrating charge point availability and recharge time into
their planning. These costs will be significant for any individual company to bear, and theinsurance industry can support by providing policy structures that put financial protections
around these risks to encourage the flow of capital into infrastructure projects.
Not only is the availability of infrastructure important, but improvements in theinteroperability of charging networks will be crucial to delivering a future-proof charging
infrastructure. This will require collaboration between industry participants as well as
governments, in order for consistent standards to be adopted.
Heightened risks of electric vehicles
Analysis of recent insurance claims by Allianz has indicated that, whilst electric vehicles
are less likely to be involved in accidents due to shorter distances travelled, any damage
sustained can be more expensive on average than for conventional cars. Whilst there isinsufficient density of data to draw comprehensive conclusions at this stage 50, this is anarea that the insurance industry will need to be cognisant of as the use of EVs continues togrow. It is critical that insurers are able to understand and respond to these changes in therisk landscape and refine the coverage they provide accordingly.

49 Climate Change Committee - The-UKs-transition-to-electric-vehicles.pdf (theccc.org.uk)
50 Allianz - AGCS-Electric-Vehicles-Risk-Report.pdf (allianz.com)
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The battery supply chain
As the global EV market continues to grow, there will also be a critical dependency on
battery manufacturing capacity. The electrification of cars is a crucial driver in reducing
battery manufacturing costs through economies of scale, and the cost of lithium-ion
batteries has fallen by approximately 87% since 2010 51. The UK is seeking to develop‘gigafactories’ across the country in order to produce batteries at larger volumes,
however there is currently limited capacity to extract and process enough raw materials
such as lithium, nickel and cobalt to meet the anticipated requirements. The supply ofsome of these materials is also highly concentrated, with the Democratic Republic ofCongo currently responsible for approximately 70% of global cobalt supply and China
responsible for around 80% of all commercial-grade refined cobalt 52. There is currently nocommercial production of battery quality lithium raw materials in Europe, however researchin the UK led by the Li4UK project is finding ways to produce lithium carbonate fromUK-based raw materials, potentially providing a more sustainable supply chain as the
EV industry gains momentum 53.
The demand for these materials has grown sharply over the last decade, particularly formetals used in the manufacturing of electronics such as lithium and cobalt. The extraction
and ultimate disposal of these metals has a potentially harmful environmental impact;
100-120 GWh of electric vehicle batteries are estimated to retire by 2030, a volume roughly
equivalent to current annual battery production 54. In addition, the restricted supply of raw
materials will mean that manufacturers are exposed to heightened risks across their supply
chains, for example due to geopolitical disputes. The insurance industry, which for decades
has insured physical assets globally against loss due to political instability, can help vehicle
manufacturers understand where these key dependencies lie in their supply chains andsupport to manage these risks.
The risks of increased connectivity
The growth in EVs is closely correlated with the growth in autonomous vehicles. The
resulting increased connectivity and reliance on data has the potential to make theelectricity system more vulnerable to cyber-attacks; an attack on EVs and fast charging
stations could cause significant disruption to local power supply, with a central pool
potentially required to cover catastrophic risks such as total outages of services
and systems. Insurers will need to reflect on the increased inter-connectedness of
infrastructure networks, to the extent that it may increase exposure to cyber-related claims.

51 Bloomberg NEF - BNEF EVO Report 2020 | BloombergNEF | Bloomberg Finance LP
52 NS Energy - China, cobalt and the Congo: Why Xi Jinping leads the batteries arms race (nsenergybusiness.com)
53 Li4uk - lithium 4 UK | Securing Domestic Lithium Supply Chain for UK (li4uk.co.uk)
54 International Energy Agency - Global EV Outlook 2020 – Analysis - IEA
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Roadmap for action
The business model of automotive companies operating in the EV sector isshifting from manufacturing towards providing full lifecycle solutions tocustomers. New insurance requirements are emerging as a result of this change
in business model, for example an increase in demand for non-damage businessinterruption cover to protect against enhanced risks of connectivity, and coverfor inter-connected global operations (compared to cover for local operations).
Insurers will need to refine their product offerings to remain relevant in achanging industry.
To drive innovation and accelerate product development, through the SMI
Insurance Task Force Lloyd’s will:– Design an innovative EV insurance product to address protection gaps as
new risks emerge and vehicle business models evolve.
Lloyd’s will then:– Facilitate a product design sprint to develop potential products from
ideation to commercially viable products.

Key:

The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

Lloyd's

5. Greener Energy

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5. Greener Energy
5.1 Offshore wind
Introduction
Wind energy is central to facilitating a global transition towards a future-proof energy
system. China, Germany and the UK were the world’s largest offshore wind producers in
2020, and China is leading on new capacity installations 55. In the last thirty years, Britain’s
reliance on coal for electricity has decreased significantly from 70% in 1990 to less than
3% today 56. A major part of this transition has been driven by the growth in electricity
generation from wind energy, with 9.9% of the UK’s electricity in 2019 being generated
by offshore wind 57.
The future of offshore wind
The global offshore wind market is evolving rapidly, and technology innovation will be key
to driving growth as the sector matures. Advancements in floating wind technology are
helping to accelerate growth in areas further from shore and in deeper waters. This in turnis unlocking wind energy generated in regions previously considered unsuitable for fixedbase offshore wind installations, posing a significant growth opportunity for the sector.
This is driving the emergence of new offshore wind markets outside Europe, which
previously dominated the market. At the end of 2018, 83% of the world’s offshore windcapacity was produced in Europe; over the next decade, however, it is anticipated that Asiaand the US will account for 48% and 11% of new offshore wind development respectively 58.
Turbine technology is evolving, with blades continuing to increase in size and energy
production from a single turbine also continuing to increase. New drone technologies arebeing tested and are expected to play a vital role in the inspection and maintenance of
these larger wind turbines, given they are typically positioned in less accessible locations
further offshore.
Key commitments to offshore wind development
Significant commitments have been made globally to increase offshore wind production.
The UK Government, for example, has stated its ambitions to increase offshore windproduction to 40GW by 2030. This includes 1GW of innovative floating offshore wind,which is equivalent to over fifteen times current worldwide volumes of production 59. It is
this backdrop of a substantial growth trajectory combined with a changing risk landscapethat paves the way for insurers and their distribution partners to play a critical role indriving the success of the sector.

55	
REVE - World Gets 2.5 GW of Offshore Wind Energy in H1 2020 | REVE News of the wind sector in Spain and in the world(evwind.es)
56	
Department for Business, Energy & Industrial Strategy - End of coal power to be brought forward in drive towards net zero GOV.UK (www.gov.uk)
57 GOV.UK - Wind_powered_electricity_in_the_UK.pdf (publishing.service.gov.uk)
58 EY - Which Direction Is Offshore Wind Blowing? | Discover (ey.net)
59 GOV.UK - New plans to make UK world leader in green energy - GOV.UK (www.gov.uk)
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Key challenges
Turbine infrastructure and new technologies
In order to achieve continued growth in the offshore wind sector, supporting infrastructure
must be transformed with significant investment in bigger turbines, cabling andtransmission infrastructure to connect new wind farms to the onshore electricity grid. The
cost of installing this infrastructure will be a key barrier to success in this sector. In orderto overcome this, corporates are increasingly seeking economies of scale by developing
turbines with bigger capacities; 15MW turbines are expected to be standard by 2030,
compared with an average capacity of 4MW ten years ago 60, in turn resulting in increased
need for significant investment from a breadth of capital providers and private investors.
These investments must be backed by insurance programmes that can help to de-riskthese investments and facilitate the necessary capital flows.
Evolution of wind turbine heights and output

13-15 MW

300m

9 MW

200m

1.2 MW100m

1-12 kW
19th C

2 MW

4 MW

7 MW

0.5 MW

1990

1995

2000

2005

2010

2015

It is also important to reflect on historic wind energy assets currently in operation. The
lifespan of wind farms is much lower than coal-fired power stations, with a wind farmtypically considered to have a design life of 20 years 61. A growing number of turbines arethus reaching the end of their operational lifetimes, and in 2021 we expect owners ofaround 4.8GW of onshore capacity to be faced with end-of-life decisions on the assets 62.
This creates challenges with respect to the decommissioning and recycling of materials,
with the high price of decommissioning acting as a deterrent for some insurers entering
the market 63.

60 ORE Catapult - Delivering 40GW - Accelerating the UK's Transition to net zero (catapult.org.uk)
61 ClimateXChange - Life Cycle Costs and Carbon Emissions of Offshore Wind Power (climatexchange.org.uk)
62 Bloomberg NEF - Energy, Transport, Sustainability – 10 Predictions For 2021 | BloombergNEF (bnef.com)
63 Lloyd’s of London Emerging Risk Report 2017 Innovation Series - https://www.lloyds.com/~/media/files/news-and-insight/
risk-insight/2017/stranded-assets.pdf
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5. Greener Energy
This brings into focus the full carbon life cycle of wind farms, including the use of carbon
intensive materials such as concrete for turbine construction. The carbon payback period,
defined as the time for the carbon emissions displaced by wind power to equal the life cycle
carbon emissions of the wind farm, is an average of 0.6 years for an offshore wind farm,
therefore significantly lower than its design life 64.
Evolving risk landscape
As offshore wind farms become bigger and move further from shore, the risk landscapein this sector is evolving. The development of larger wind farms, both in terms of size aswell as turbine capacity, is likely to result in new claims challenges, including increased
mechanical breakdowns, cable faults resulting in lapses in power generation, andfoundation-related damage, particularly at deeper-water sites. In addition, there will beheightened exposure to natural catastrophe risk at deep-water sites, both in terms ofphysical damage as well as potential project delays caused by extreme weather events.
Furthermore, operational floating windfarms in deeper locations could have their own
unique risk profile, one that does not necessarily match any existing claims data, although
it is already clear that there will be an increased probability of cable damage due to thelonger cables required to transmit energy back to shore.
Claims losses for the offshore wind sector have so far primarily been driven by cabling
and foundation-related risk events, with analysis from California-based GCube, a leading
insurance provider in the renewable energy market, indicating that these accounted for
55% and 35% of total claims respectively over the past 10 months 65. There have also beensignificant mechanical breakdown losses incurred at all but one of the worldwide floating
wind installations currently in operation.
Insurers will ultimately need to understand the changes to the risk profile of offshore windassets and respond with appropriate insurance cover that is reflective of the changing
risks, as well as supporting corporates in managing them. There is an opportunity for the
insurance industry to work closely with energy companies and share their expertise inmodelling natural catastrophes. This would ensure a consistent and deeper understandingof risk across the sector, and establish a successful platform to provide specialist cover fornatural catastrophe and extreme weather events. This is particularly the case in emerging
markets in Asia-Pacific, which face more volatile weather conditions combined with lesshistory in the sector relative to established markets.
Variability in energy generation
As wind energy contributes to an ever-increasing proportion of global electricity
generation, there are concerns around the variability of electricity generation from wind
and the extent to which this may complicate the case for further investment. Part of thesolution may lie in expansion of offshore wind farms to locations further offshore, wherewind conditions are more consistent. New technologies are also being explored, such ashydrogen fuel cells, which harness and store excess offshore wind energy for whengeneration is reduced.

64 ClimateXChange - Life Cycle Costs and Carbon Emissions of Offshore Wind Power (climatexchange.org.uk)
65 GCube - Claims: Offshore wind must quickly respond to changing global risk profile : GCube Insurance Services » Renewable
Energy Insurance Coverage (gcube-insurance.com)
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Financial guarantees will be necessary to solve the complex issues of variability in electricity
generation; national governments in regions such as the Nordics, for example, provide
availability guarantees to protect operators in this sector from the revenue risk associatedwith this variability. For those who do not benefit from such government guarantees, theinsurance market has taken some steps to provide operators with protection against
variability in wind volumes in the form of index-based parametric cover, which goes some
way to mitigating this risk.
Roadmap for action
Offshore wind projects continue to increase in scale and complexity, withadvances in turbine technology (with respect to foundation depth, distance fromshore and power output of each turbine) evolving rapidly. The global insurance
industry has a unique opportunity to further expand the coverage it provides tothe offshore wind sector to meet demands for additional insurance capacity,which is being driven by the rapid advancement of new offshore wind technology
including turbines and floating wind technology.
In addition, given the size of many offshore wind projects, a blended financing modelis necessary which typically requires a combination of investment from private
corporates (often large utilities and/or oil and gas companies), overseas investors
and large institutional investors to achieve success.
To support and accelerate the growth of offshore wind, the SMI Insurance Task Force has:– Convened a workstream focused on supporting and encouraging moresustainable investment, including into offshore wind projects. In 2021, theworkstream will launch a green investment proposal, outlining the intent andcapability of the insurance industry to make resources available to support
green investment, and the regulatory changes required to realise this ambition.
– Provide a platform to ensure there is co-ordinated action between theinsurance industry, operators in the offshore wind sector and private investors.
In addition, Lloyd’s will:– Commit to expanding its coverage to ensure capacity constraints do not limit
the growth of the industry.

Key:

The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

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5.2 Nuclear
Introduction
Since the origins of nuclear power generation in the 1950s, the global insurance industry
has provided insurance for the unique needs of nuclear energy projects through risk
pooling, alongside public-private partnerships. Nuclear pools were formed to insure civil
nuclear risks within their national market and provide inter-pool reinsurance. They werecreated in the spirit of a bilateral relationship between the newly forming sector,
governments and the insurance market.
As the second largest source of low-carbon energy, nuclear energy now provides around
10% of global electricity supply, generated from around 440 power reactors across 31
countries 66. Predictions from the 2020 World Energy Outlook suggest electricity
generation from nuclear could increase by almost 55% by 2040 in its sustainable
development scenario 67. Nuclear energy provides many developed and developing
countries with a reliable source of energy that complements more intermittent renewableenergy which relies on external conditions such as weather. A blend of both nuclear andrenewable energy sources therefore enables cities and countries to achieve a stablesupply of low-carbon power to their electricity grids.
Although some scepticism remains as to whether nuclear energy should be a long-term
solution, owing to the carbon intensity of the construction and decommissioning of nuclear
power plants and the safety of nuclear waste disposal, emissions during the construction
period are typically offset between 18 months and five years of operation. Over the 60 to
80-year lifespan of a nuclear power plant, it is therefore expected to generate a negative
carbon footprint.
The carbon lifecycle of a nuclear project

GHG emissions(g CO2 – equilvalent / kWh)

30

25.1
20

11.6

10

8.2
0

Extract,enrich anddeliver fuelPlant
construction

Plant
operation

9.2
Spent fuelconditioning
and storage

12

Deconstructplant andreclaim land

66	World Nuclear Association - https://www.world-nuclear.org/information-library/current-and-future-generation/nuclear-power-inthe-world-today.aspx
67 The International Energy Agency – The World Energy Outlook Report 2020
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Development of global nuclear capacity
The US is currently leading the nuclear energy market, accounting for more than 30% ofworldwide nuclear generation of electricity 68, closely followed by France 69. Nuclear power
capacity worldwide is increasing steadily, with around 50 reactors currently underconstruction 70, in countries including China and the United Arab Emirates. In the UK,
nuclear power stations are amongst the highest performing in the world, generating 20%of the country’s electricity 71. This impressive output provides carbon savings equivalent totaking one third of all cars off UK roads. This nuclear power capacity is being further
developed through new large-scale nuclear projects, including Hinkley Point C, the firstnuclear power station to be built in the country in over two decades 72.
The future of nuclear technology
The next generation of nuclear technology is also being actively explored. For example, theAdvanced Reactor Demonstration Program in the US provides initial funding to develop,
test, licence and build advanced nuclear reactors. These technologies potentially address
several challenges of larger nuclear power plants, by reducing upfront capital investment
and build time while simultaneously enhancing efficiency and maintaining high levels ofsafety standards and protection.
Nuclear applications also extend beyond its direct use as a low carbon energy source.
There is a potential future role for nuclear technology in powering the production of greenhydrogen, which could act as a key enabler in facilitating decarbonisation across a rangeof sectors. In addition, nuclear technology has potential applications in the maritime
industry through the use of low carbon nuclear propulsion on ships using liquid fuelled
micro-reactors.
Key obstacles and role of the insurance industry
The nuclear insurance landscape
Nuclear insurance typically includes first-party liability covering property, machinery andbusiness interruption, and third-party liability covering site and transit liabilities. The
complex, large-scale and catastrophic risks that nuclear projects present have meant thatcommercial insurance markets have not been able to provide the net capacity to insure
civil nuclear industry risks. In addition, since the formation of the sector in the 1950s,
general insurance policies have applied a nuclear exclusion clause to exclude damage
caused by nuclear or radiation 73. These two factors combined have created the need for
bespoke and innovative coverage solutions.

68 International Energy Agency - Nuclear - Fuels & Technologies - IEA
69 World Nuclear News - Macron stresses importance of nuclear energy for France : Nuclear Policies - World Nuclear News (worldnuclear-news.org)
70 World Economics Forum - Where are the world's 449 nuclear reactors? | World Economic Forum (weforum.org)
71 World Nuclear Association - Nuclear Power in the United Kingdom |UK Nuclear Energy - World Nuclear Association (worldnuclear.org)
72 Nuclear Industry Association - Fortyby50_TheNuclearRoadmap_201009.pdf (niauk.org)
73 LMA5202 Nuclear Risk Exclusion Clause (Property Reinsurance) (lmalloyds.com)
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Globally, there are 28 government insurance pools for nuclear risks, 19 of which are inEurope 74. These offer reciprocal reinsurance capacity to reach the required level of cover for
nuclear power plants (NPPs) and the wider civil nuclear industry fuel cycle (see infographic
below), and enable both governments and the insurance industry to work together to provide
accessible solutions for the civil nuclear industry. In doing so, they can protect thecommunities in which NPPs are situated and provide a large part of the social licence fornuclear operators to operate.
This is an example of the insurance industry collaborating to create a successful insurance
solution to a regionally systemic risk, something which Lloyd’s has been involved in from theestablishment of the British Insurance (Atomic Energy) Committee in 1956, the forerunner of
NRI. Lloyd’s is aiming to replicate this approach more broadly through Futureset, its global
platform and community to create and share risk insight, expertise, and solutions to our mostchallenging insurance problems.
Simplified artistic view of the typical nuclear fuel cycle

Enrichment

Milling

For naturaluranium fuels

Conversion

Fuel fabrication

MOX fuel
fabrication

MiningPower plant
Reprocessing

HLW

Key:
Recycling

Spent fuel disposal

74 Nuclear Risk Insurers - Nuclear Pools
Lloyd's. Insuring a sustainable, greener futureSpent fuel storage

N.B.
Zach to work up
Electricity

5. Greener Energy

5. Greener Energy
The other major sources of insurance capacity for nuclear risks are through captives andmutual insurance entities of which there are several operating today – providing nuclear first
and third-party liability capacity in partnership with commercial insurers, of which the
Lloyd’s market is the global leader.
The nuclear industry has traditionally been excluded from the mainstream insurance
markets of most countries, creating the specific need for bespoke coverage. A significant
proportion of this is provided through the Lloyd’s market, with a number of syndicatesproviding specialist coverage for civil nuclear installations, property damage, machinery
breakdown, business interruption, nuclear third-party liability, nuclear transit liability andconstruction. The Lloyd’s market remains involved in the provision of insurance on new
projects such as Hinkley Point C in the UK and other builds internationally, during
construction through to operation and eventual decommissioning.
Nuclear development costs
While nuclear power generation offers significant benefits in providing low-carbon andconsistent energy to the grid, the lifecycle of a nuclear project is a costly endeavour which
requires both significant up-front investments to fund the design and construction of aplant, together with the eventual and time-consuming decommissioning of the site once
the reactor has reached its useful limit. Currently, the majority of decommissioning costs in
the UK are met by the Government through the Nuclear Liabilities Fund, however thisapproach differs by country. In France, for example, decommissioning costs are primarily
met by the nuclear industry.
The significant cost of capital represents a key challenge for the expansion of the sector,
requiring an appropriate funding model for new nuclear capacity that drives a better returnon investment. The high upfront costs of new nuclear and long construction timelines meanthat new financing models have been required to make projects more viable – notably theregulated asset base (RAB) model of financing, which the UK Government has backed as a“credible model for large scale nuclear projects” 75.
Another related issue is the extent to which investors are willing to take on the unique risks
that nuclear power brings, such as the potential to cause long-term, catastrophic health andenvironmental impacts, for example as a result of improper disposal of nuclear waste. A key
dependency will be on whether nuclear energy is included in the EU’s sustainable financetaxonomy, a decision on which is expected soon by the European Commission, which will
impact whether nuclear energy is considered a sustainable investment. The global insurance
industry via the nuclear pools has a role to play in providing sufficient coverage to ensure
private investors are comfortable with the residual risk to which they are exposed.
Attempts to minimise construction risks and costs are also being actively explored by the
nuclear sector, for example through replication of existing designs as well as increasing theuse of Small Modular Reactors. In the UK, the Government is targeting a 30% reduction in
the cost of new nuclear projects by 2030 76. Nuclear energy providers are also working to
reduce the environmental impacts of the construction and decommissioning phases byreducing volumes of materials used, reducing and reusing waste, and effectively managing
water resources.

75 Department for Business, Energy & Industrial Strategy - Regulated Asset Base (RAB) model for nuclear - GOV.UK (www.gov.uk)
76 Nuclear Industry Association - Fortyby50_TheNuclearRoadmap_201009.pdf (niauk.org)
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Nuclear liability capacity
Several barriers exist to limit the expansion of insurance capacity, including the inherent
volatility of nuclear insurance claims, given the low frequency and high severity thatlosses can present. Despite strong safety and performance records of the nuclear
industry, the perceived risk of nuclear energy remains a key barrier to entry for many
insurers and investors, and a greater level of education will be required to addressthese existing concerns.
Nuclear operators’ third-party liabilities are governed through a number of international
conventions. Under revisions to the Paris Convention that are expected to come into force
from January 2022, third-party liability limits will increase significantly for operators inparticipating countries. The amended Paris Convention will cover a broader range ofdamage than it does today, and the claims period for nuclear damage in relation to life andpersonal injury will be extended from ten to 30 years 77, significantly increasing the scopeand complexity of claims and impacting some insurers’ appetite to offer the increased
insurance coverage that many operators will be seeking. In particular, an increase in the
mandated claims period could significantly increase the loss of life and personal injury
claims incurred by nuclear operators, as an extended claims period will consequently
capture claims from those suffering from longer term illnesses or the delayed effects ofharmful nuclear exposure.
Losses due to nuclear site accidents are generally covered by very few policies, with liability
channelled through the site operator, creating further concentration risk and increasing thevolatility of outcomes for insurers. In addition, despite a few significant nuclear accidents inrecent years, the availability of comprehensive actuarial data from the nuclear industry is
low because of the low incidence of losses.
However, there is an opportunity for insurers to support the future development of low
carbon nuclear projects through the provision of cover for tranches of construction risk
relating to new nuclear capacity. With statutory third-party liability cover for the nuclear
industry expected to increase substantially due to a pending change in regulations,combined with new nuclear capacity being developed, there is demand on the non-mutual
insurance market to alleviate some of these pressures by providing the requisite additional
capacity. Given the scale of the risks, this will likely need to be in parallel with government
support packages.

77 Nuclear Energy Agency – 2004 Protocol to Amend the Paris Convention
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Insuring the future of nuclear technology
Nuclear power technologies have been evolving in recent years and new innovations suchas passive safety systems and digital continual plant assessment are significantly reducing
nuclear risks. Small Modular Reactors also contribute to lowering risks, as they containsmaller quantities of radioactive materials and are designed to rely more on inherent safetycharacteristics rather than operational measures and human intervention.
Another emerging technology is nuclear fusion which, in contrast to nuclear fission, carries
no risk of nuclear reactor meltdown (as it produces no chain reaction) or high activity,
long-lived nuclear waste. As a result, the type and level of third-party liability insurance will
inevitably need to be tailored.
Critically, there will be a need in the immediate term for innovation and customised solutions
to provide protection for such new technologies, from construction through to operation.
Roadmap for action
The global insurance industry has a unique opportunity to further expand thecoverage it provides to the nuclear industry in order to meet demands for
additional insurance capacity, which is being driven by anticipated regulatorychanges and the development of new nuclear capacity. The Lloyd’s market
provides significant capacity to nuclear risk specialists NRI (the British Nuclear
Insurance Pool) and Northcourt (an independent MGA), who take an active leadin identifying how to increase insurance capacity for the sector, and what
combination of government support, risk pooling, and mutual arrangements isneeded to ensure adequate protection is available.
As global leaders in providing insurance for the nuclear energy sector, Lloyd's
will support the increase in nuclear insurance capacity through:– Providing a platform to ensure there is co-ordinated action between theinsurance industry, civil nuclear sector and government, and to ensure that
nuclear operators are able to meet the additional liability required byregulations.

Key:

The global insurance industry

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5. Greener Energy
5.3 Hydrogen
What is Hydrogen?
Hydrogen is a fuel that produces no direct GHG emissions or other pollutants when
combusted. Its lightness and energy density, combined with its ability to act as an energy
carrier that can be used to store, move and deliver energy produced from other sources,
makes it a key enabler in accelerating the decarbonisation of a range of sectors, including
metals and mining, chemicals, domestic and international freight, heavy transportation,
cement and agriculture. In addition, as a liquid fuel, hydrogen has key advantages instorage and transportation.
Hydrogen supply chain
Compressed gas tube trailers

LH2

or

H2

or

or

LH2

H2
CNG

1
Steam reforming/
gasification

e-

H2O
H2+O2
Water
electrolysise-H2Ammonia*ormethanol

3

H2

+N2
(Haber-Bosch process)

LNG

2Synthetic CH4+CO2/CO(methanation)* Alternative transport methods like methanol will be assessed at IHS Markit fall 2019 workshops
Source: IHS Markit

H2O
H2+O2
Water
electrolysis

How is Hydrogen produced?
Hydrogen can be produced from a variety of sources, such as natural gas, biomass, andrenewable power, and this in turn informs its classification – grey, blue or green. Currently,
the majority of hydrogen is grey hydrogen, which has a high carbon footprint and is often
produced using fossil fuel inputs.
Blue hydrogen, on the other hand, has a lower expected carbon footprint and uses natural
gas and carbon capture and storage as feedstock for its production; it is typicallygenerated at historic oil and gas production sites.
Green hydrogen goes one step further and has an even lower carbon footprint than bluehydrogen. It is produced by splitting water by electrolysis using electricity that has been
produced using excess energy from renewable energy sources such as wind and solar.
The most critical factor driving the cost of green hydrogen is the price of the renewableenergy used as an input; in the first instance, it is likely that the majority of growth in cleanhydrogen production will be driven by blue hydrogen until renewable energy achieves
sufficient scale to make production of green hydrogen economically viable 78.
78 IEA - The clean hydrogen future has already begun – Analysis - IEA
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5. Greener Energy
Green hydrogen
Green hydrogen is produced by using electricity to split water (H₂O) into its
component parts – hydrogen and oxygen. If the electricity is produced by renewable
power, such as solar or wind, the resulting hydrogen is carbon-free.
Green hydrogen has the potential to play a particularly prominent role in the storage
and transmission of excess energy output from intermittent renewable energy assets,
which can then be redeployed globally for heat, electricity and as a key energy input
for industry.

Hydrogen process

O2+H2
Electrolysis

Renewable energy

Green hydrogen

O2+H2
Grid energy

Carbon captureand storage

Electrolysis

Blue hydrogen

Carbon captureand storage

Natural gas

Lloyd's. Insuring a sustainable, greener future

Steam methane
reforming

Brown hydrogen5. Greener Energy

5. Greener Energy
How can hydrogen be used to support decarbonisation?
Hydrogen is widely used as a low-carbon alternative in many industrial applications as afuel which is burned with oxygen. It can be used in fuel cells, internal combustion engines
and industrial heating processes.
Hydrogen use today is mainly dominated by industry, however its potential uses span
across the entire value chain from renewable energy generation, through to transportation,and homes and buildings. Hydrogen fuel cell technology can be used to power anythingthat uses electricity, with applications across transportation such as electric vehicles andaviation, and offers the benefit of higher energy efficiency than traditional combustion
engines. Hydrogen can also be blended into existing gas networks to provide power tohomes and public buildings.
Green hydrogen goes one step further and has an even lower carbon footprint than bluehydrogen. It is produced by splitting water by electrolysis using electricity that has been
produced using excess energy from renewable energy sources such as wind and solar.
The most critical factor driving the cost of green hydrogen is the price of the renewableenergy used as an input; in the first instance, it is likely that the majority of growth in cleanhydrogen production will be driven by blue hydrogen until renewable energy achieves
sufficient scale to make production of green hydrogen economically viable .
In addition, hydrogen can be a leading option for storing renewable energy whenconverted into a carrier such as ammonia, helping to manage both the variable output
from renewables as well as the transportation of renewable energy over long distances,such as from offshore wind farms.

Green steel
Steel is traditionally produced using iron ore and/or scrap metal as a basic material,
together with a reducing agent which removes oxygen from the iron ore. Traditional
manufacturing uses coke as a reducing agent, which emits carbon dioxide when it
reacts with the oxygen in the iron ore.
Green steel is produced using hydrogen instead of coke as the reducing agent. Whilehydrogen also reacts with oxygen in the iron ore, the result is water vapour rather
than carbon dioxide.
Plans are underway to build a green steel production facility in Sweden, using a
fossil-free manufacturing process which will be powered by the world’s largest greenhydrogen plant. The size of H2 Green Steel’s hydrogen plant is expected to bearound 800 megawatts, with its end-product replacing coal and coke in the steel
manufacturing process. Steel production is expected to begin in 2024, and by 2030
the aim is to have the capacity to produce 5 million tonnes of steel per year.

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5. Greener Energy

5. Greener Energy
Hydrogen strategies
The EU has put hydrogen at the heart of its green recovery, with a target of 40GW ofelectrolyser capacity by 2030 79. It also has ambitions to strengthen the hydrogentransportation network in the region, working with gas grid operators to develop the‘European Hydrogen Backbone’ which leverages existing gas transmission pipelines toconnect the demand and supply of hydrogen.
Similarly, the UK Government has identified the growth of hydrogen as a strategic
imperative and aims to develop 1GW of low carbon hydrogen production capacity by 2025
(increasing to 5GW by 2030). It also plans to launch a £240m net zero hydrogen fund topromote low carbon hydrogen production in the UK, and will release its formal hydrogenstrategy later in 2021 80.
The Sustainable Markets Initiative has established a Hydrogen Taskforce to support andaccelerate the deployment of hydrogen globally as one of the decarbonisation tools criticalto facilitating net zero emissions. The Task Force, chaired by Shell, has committed to anumber of actions ahead of COP 26 in November 2021 including: creating a template for ahydrogen ecosystem to act as a basis for a hydrogen energy-based economy, developing
formal pledges with participating companies committing to the use of clean hydrogen in
their supply chains, and identifying policy and regulatory levers needed to accelerate theadoption of hydrogen fuel cells in transportation.
Key challenges
Hydrogen infrastructure networks
A key obstacle to the success of hydrogen is the infrastructure required to achieve scale.
Though the technology to use hydrogen for heat, electricity and as an input for industry
has existed for some time, infrastructure is essential to enable the hydrogen economy tooperate across its full value chain from upstream production, to midstream storage andtransmission to downstream fuelling and distribution.
Any development should enable hydrogen to be transported at scale through the existinggas transmission network or via the use of specialised vehicles that can transporthydrogen safely. The conversion of existing natural gas pipelines to deliver hydrogen is asignificant and costly undertaking as hydrogen’s potential to embrittle steel pipelines above
a certain concentration threshold will result in the need for pipeline modification.
In addition to the cost of any hydrogen transportation infrastructure modification or
introduction, hydrogen itself is currently costly to produce. Green hydrogen production
costs could fall by up to 30% by 2030 according to some projections, however such a
reduction would be dependent on a decline in the cost of renewable energy, an increasein production to benefit from economies of scale, and significant investment to achieve
economic viability 81.

79 Environment Analyst - Environment Analyst Global | Environment Analyst Global (environment-analyst.com)
80 HM Government - The Ten Point Plan for a Green Industrial Revolution (publishing.service.gov.uk)
81 International Energy Agency - The Future of Hydrogen – Analysis - IEA
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5. Greener Energy

5. Greener Energy
The production of low-carbon hydrogen is in its early stages, with less than 0.7% ofhydrogen production globally currently “clean” (i.e. blue or green hydrogen) 82. There is an
expectation that this proportion will grow significantly should national governments achieve
the ambitions contained within their respective hydrogen strategies, however it remains tobe seen whether these obstacles to success can be overcome collectively by industry,
insurers and government.
The insurance industry can help to de-risk investment into hydrogen infrastructure andincentivise private-sector investment. This will ultimately enable the hydrogen economy
to achieve scale and therefore drive down production costs. This will, however, require along-term government policy framework to give investors the certainty they require,connectivity between individual projects and a broader infrastructure network to ensure
the hydrogen economy can operate across its entire value chain, and a clear risk allocation
mechanism between governments, the private sector and insurance providers where suchrisks are too great for one stakeholder to carry alone.
The nature of hydrogen risks
As the hydrogen economy continues to grow, there will likely be significant changes tothe risk landscape of the industries looking to utilise this energy source, which may
naturally give rise to additional safety risks, for example due to its flammability andexplosive properties. These risks exist across the entire hydrogen value chain, including
during transportation and storage at the point of use, where leakages can be catastrophic.
The insurance industry therefore needs to understand , and then help companies
operating across the hydrogen economy to better understand the changing risk profileand subsequent coverage requirements. The insurance industry is uniquely placed tosupport this centrally, using its experience across multiple industries to create global
best-practice guidelines.
The Lloyd’s market is already providing specialist insurance cover for safety risks
associated with the transportation of hydrogen. Such cover will likely need to bescaled, particularly as the modification of existing gas transmission pipelines continues
to gather pace.
Insurance cover is already relatively well established for offshore wind projects involved ingreen hydrogen production (recognising that this subset of the offshore wind market is stillin early stages of development). There is a precedent on which the insurance industry canbuild to provide broader coverage to other segments of the hydrogen economy andits value chain.

82 EUI Florence School of Regulation – Clean hydrogen
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5. Greener Energy
Roadmap for action

Hydrogen is a vector of change and facilitator of decarbonisation for several
sectors and significant investment will be required to develop hydrogen
infrastructure. The use of hydrogen also introduces unique safety implications
which will need to be appropriately identified, measured, monitored andmanaged, and insurers are well-placed to support customers across multiple
industries with this.
Insurers should enter dialogue with corporates operating across the hydrogenvalue chain to better understand the challenges they are facing in obtaining
specialist insurance cover, and consider how cover may need to be segmented
or consolidated across components of the hydrogen value chain to prove
effective.
To help facilitate the develop of hydrogen, the SMI Insurance Task Force will:– Work closely with the SMI Hydrogen Task Force to open up discussion withcustomers operating in this space on the specific challenges they are facing todevelop insurance coverage for innovative or prototypical hydrogentechnologies and infrastructure.
To support this, Lloyd’s will:– Lead research through Lloyd’s Futureset into the specific risks posed byhydrogen, including its flammability, and how these risks might emerge in
different ways according to how this fuel is used at a sectoral level. This will help
corporates and private investors to understand how these risks can be managed
and where specialist coverage may need to be introduced or expanded, forexample in relation to the transportation of hydrogen.

Key:The global insurance industry

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6. Committing to action

N.B.
To come

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6. Committing to action
Lloyd’s and the global insurance industry are uniquely positioned tofacilitate efforts across communities, businesses and governments
around the world to drive a transition to a lower carbon economy.
Lloyd’s and the global insurance industry are uniquely positioned to facilitate and accelerate
efforts across communities, businesses, and governments around the world to drive thetransition to a lower carbon economy.
We have engaged with a range of insurers, Lloyd’s market participants and corporates
operating in the identified sectors to assess the scale and complexity of decarbonisation
ambitions, and to identify ways in which the insurance industry can act as a facilitator andconvenor to drive change.
We believe the Lloyd’s climate action roadmap will accelerate change across all of thesectors discussed in this report, leveraging a range of delivery mechanisms which strike
the balance between effectively delivering what is within our control and progressing
actions where broader industry collaboration and partnership is necessary for success.
In particular, within this roadmap we have identified areas in which Lloyd’s specifically will
drive forward action to catalyse change within the Lloyd’s market, alongside actions which
will be accelerated through the SMI Insurance Task Force and collectively taken forward by
the global insurance industry.
The actions can be summarised across these delivery mechanisms as follows:
Actions to be delivered by the global insurance industry– Direct capital towards climate-positive solutions through integrating ESG
factors into investment decisions and identifying impact investment
opportunities.
– Work with investors and governments to provide financing structures tosupport disaster resilience, response and recovery in developing countries.
– Incentivise customers to lower their buildings’ carbon footprint, and introduce‘build back better’ wordings in policies.
– Refine insurance products to reflect evolving business models of automotive
companies, covering full-lifecycle solutions for electric vehicles.
– Understand the risk implications of technological advancements and alternativefuel sources for the aviation and marine sectors to ensure that insurance
products can evolve in tandem.
– Expand offshore wind sector coverage to meet additional demands driven bytechnological advancements.
– Further expand nuclear coverage to meet demands for additional capacity
driven by emerging regulation and growth in nuclear capacity.
– Work with corporates across the hydrogen value chain to better understandkey challenges and opportunities for specialist cover.

Key:

The global insurance industry

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6. Committing to action
Actions to be delivered through the Lloyd’s-chaired SMI Insurance Task Force– Develop a consolidated industry-wide framework to accelerate investment inlong-dated green assets, supporting climate innovation and the transition to
renewable energies.
– Develop and pilot a framework to provide financing structures to support
disaster response and recovery in developing countries.
– Develop and launch an industry-wide framework for greener insurance supply
chains to support customers in shifting towards sustainable construction.
– Design an innovative EV insurance product to address emerging protection
gaps as new risks emerge and vehicle business models evolve.
– Work closely with the SMI Aviation and Shipping task forces to identify
requisite insurance coverage for emerging risks and new technologies.
– Develop a consolidated framework to accelerate and scale insurance industry
investment into long-dated green assets to support offshore wind.
– Provide a platform for a co-ordinated financing approach for offshore windprojects between the insurance industry, offshore wind operators and private
investors.
– Work closely with the SMI Hydrogen Task Force to develop insurance coveragefor innovative or prototypical hydrogen technologies and infrastructure.
Actions to be delivered by Lloyd’s– Conduct targeted research to understand the risk profile of new construction
materials and techniques, exploring the insurance implications andopportunities for new or evolved risk solutions.
– Facilitate a product design sprint to develop an innovative EV insurance
product from ideation through to commercial viability to address emerging
protection gaps.
– Provide a platform for dialogue between the insurance industry andcustomers operating in the marine sector to develop insurance coverage for
emerging risks.
– Commit to expanding coverage to ensure capacity constraints do not limit thegrowth of the offshore wind industry.
– Provide a platform for co-ordinated action between the insurance industry,
civil nuclear sector and government to meet the additional nuclear liability
required by regulations.
– Lead research into hydrogen risks to identify where specialist coverage isneeded across the value chain.
In mobilising, co-ordinating and delivering on these actions, the insurance industry has theunique opportunity to accelerate the global transition towards a more sustainable world.
The actions taken by the insurance industry today to support the scale and pace of ambition
from both governments and businesses will be critical in driving positive, long-term change.

Key:The global insurance industry

Lloyd's. Insuring a sustainable, greener future

Lloyd’s in its role as Chair of the SMI Insurance Task Force

Lloyd's