“ there seems to be no immediate future in aviation insurance … ” www. lloyds. com / lloyds / about - us / history / innovation - and - unusual - risks / pioneersof - travel. bis central bankers ’ speeches the tragedy of the horizon there is a growing international consensus that climate change is unequivocal. 2 many of the changes in our world since the 1950s are without precedent : not merely over decades but over millennia. research tells us with a high degree of confidence that : • in the northern hemisphere the last 30 years have been the warmest since anglosaxon times ; indeed, eight of the ten warmest years on record in the uk have occurred since 2002 ; 3 • atmospheric concentrations of greenhouse gases are at levels not seen in 800, 000 years ; and • the rate of sea level rise is quicker now than at any time over the last 2 millennia. 4 evidence is mounting of man ’ s role in climate change. human drivers are judged extremely likely to have been the dominant cause of global warming since the mid - 20th century. 5 while natural fluctuations may mask it temporarily, the underlying human - induced warming trend of two - tenths of a degree per decade has continued unabated since the 1970s. 6 while there is always room for scientific disagreement about climate change ( as there is with any scientific issue ) i have found that insurers are amongst the most determined advocates for tackling it sooner rather than later. and little wonder. while others have been debating the theory, you have been dealing with the reality : • since the 1980s the number of registered weather - related loss events has tripled ; and • inflation - adjusted insurance losses from these events have increased from an annual average of around $ 10bn in the 1980s to around $ 50bn over the past decade. 7 the challenges currently posed by climate change pale in significance compared with what might come. the far - sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security. 8 so why isn ’ t more being done to address it? a classic problem in environmental economics is the tragedy of the commons. the solution to it lies in property rights and supply management. for instance, the ipcc has stated “ warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia ”. see ipcc - climate change 2014 : synthesis report. contribution of working groups i,

mark carney : breaking the tragedy of the horizon – climate change and financial stability speech by mr mark carney, governor of the bank of england and chairman of the financial stability board, at lloyd ’ s of london, london, 29 september 2015. * * * i am grateful to rhys phillips and iain de weymarn for their assistance in preparing these remarks, and to michael sheren, clare ashton, matthew scott and professor myles allen for their comments. i ’ m grateful to lloyd ’ s for the invitation to speak tonight on the occasion of the first city dinner held in this magnificent, eponymous “ room ”. lloyd ’ s is the bedrock of the uk insurance industry. an industry whose direct contribution to the uk economy is impressive : 300, 000 high - paying jobs and £25bn in annual gdp. its economic contribution goes much deeper. insurance supports households, companies and investors, safeguarding them from perils they could not otherwise shoulder. it matches long - term savings and investment, financing the infrastructure essential to productivity. with its unique perspective and skill set, insurance diversifies the financial system and reinforces its resilience. since 1688 lloyd ’ s has, in the great tradition of the city, served both the uk and the world, providing protection against the perils of the age ; helping enterprise and trade to thrive. from its origins in marine insurance, the lloyd ’ s market has evolved constantly to meet the needs of a rapidly changing world. the first excess of loss reinsurance was created here. modern catastrophe cover was born with your decision to stand by policyholders after the san francisco earthquake. and lloyd ’ s pioneered aviation insurance. 1 with eyes constantly on the horizon, lloyd ’ s has remained at the forefront of global insurance. today, you are insuring new classes of risk in new parts of the world – from cyber to climate, from space to specie, from curitiba to chengdu. and you are doing so in market conditions as challenging as any in the last 20 years. the need to manage emerging, mega risks is as important as ever. alongside major technological, demographic and political shifts, our very world is changing. shifts in our climate bring potentially profound implications for insurers, financial stability and the economy. i will focus on those risks from climate change this evening. the first aviation policy was written in 1911, followed in 1919 by the founding of the british aviation insurance association. that venture closed in 1921, with underwriters concluding that