Lloyd’s Chief of Markets Patrick Tiernan says assertions that climate change is primarily to blame for a rapid increase in natural catastrophe losses are wrong – and the driving force behind the trend is the growth of assets in high hazard locations.
 
Speaking at the NIBA Convention on the Gold Coast yesterday, Mr Tiernan said Lloyd’s has a “unique vantage point” to examine climate-related issues and that any conclusions must be drawn from science.
 
“We think it’s vital as an industry that we are on top of the latest science. When we see people talking from a vested interest perspective, they dwell on the headlines a bit, and we think this is pretty unhelpful.”
 
He says data shows increasing claims and losses from natural disasters in recent years, in Australia and globally. But if increases in exposure and asset values are disregarded “there is no compelling upward trend”.
 
“I think we are a little too quick sometimes to attach ourselves to the narrative that this is a direct result of climate change, and more frequency and severity [of events] caused by the climate itself.
 
“Our data shows that a lot of the upward pressure is due to increases in insured values. More of these insured values are in higher hazard locations, there is a lot of claims inflation, and there are changes in vulnerability as well.
 
“The conclusion we draw here is that the increases can largely be explained by exposure-related factors.
 
“There is just more exposure in more hazardous locations around the world and the combined impacts ... means we cannot definitively attribute the increases in claims we’ve seen just to climate change. That’s just a little bit lazy.”
 
Mr Tiernan says Lloyd’s is “not saying climate isn’t a factor”.
 
“But what we are saying is that our belief is that climate change is actually going to amplify this after we’ve taken in all of the exposure related issues.
 
“By the time we can see climate in our claims data we think it’s going to be too late to act, so we’ve got to go and act now. It is a relatively tricky message for us to land as an industry.
 
“We think it is crucial to understand the challenges that lie ahead and we believe that managing this risk requires a science-led, nuanced approach and when we speak about climate change we must be suitably forward looking in how we think about the risk.”
 
Mr Tiernan says mitigation is vital and post-event “hand-outs” are not the answer.
 
He praised the recent delegation of Australian insurance leaders and Assistant Treasurer Stephen Jones to Europe.
 
“I did recently meet with your Assistant Treasurer Stephen Jones in London. I think it’s really positive that you’ve got a government that’s leaning into this and listening to the industry.
 
“That would make me feel pretty positive in the long term for Australia. To us who are not here all the time it looks like you’ve got a government that’s willing to listen and learn from the industry.”
 
Mr Tiernan also says Australia is an important market for Lloyd’s. The Lloyd’s Australia office recently celebrated its 25th anniversary.
 
“25 years might not seem like a long time for a company that’s been around for 335 years, but make no mistake, Australia is a crucial platform for Lloyd’s.”
 
He says Australia is the third biggest region for Lloyd’s and “one of the most critical in terms of penetration and growth”. Lloyd’s has about 7% general insurance market share in Australia, but 14% share of the intermediated market, making it the fifth biggest commercial insurer.
 
“Due to a number of dynamics it’s one of the fastest growing regions in Lloyd’s global footprint,” Mr Tiernan said.
 
“Over the past seven years Lloyd’s in Australia has grown by 11% annually, outpacing our global growth rate quite considerably. And based on the numbers for the first half of 2023 we anticipate even stronger growth for this year.”