Lloyd’s has joined the Net-Zero Insurance Alliance ahead of the COP26 summit in Glasgow and will transition its Central Fund, which has net assets of £3 billion ($5.48 billion), to net zero by 2050 by redirecting capital flows to green investments, and publish a detailed roadmap to achieve this goal within the coming year.

Lloyd’s will also support all market participants to implement their own plans in order to reach a net zero underwriting position for the market by 2050 at the latest.

“We are fully committed to working collaboratively across the financial sector to achieve its net zero ambition,” Lloyd’s CEO John Neal said.

Seven leading insurers and reinsurers established the NZIA, which is expected to be launched at the 2021 UN Climate Change Conference in Glasgow in November. Axa, which chairs the alliance, and Allianz, Aviva, Munich Re, SCOR, Swiss Re and Zurich formed the NZIA in the belief the global insurance industry can play a key role in accelerating the transition to a resilient, net-zero emissions economy, in line with the 1.5°C target of the Paris Agreement on Climate Change.

Lloyd’s says climate action will be at the heart of annual business planning cycles with syndicates, and it is creating a new market-wide ‘Sustainability Transparency and Reporting Regime’ which will be used to measure and report on the market’s progress.

The measurement framework will be piloted with a select group of managing agents next year before being refined and scaled across the marketplace in 2023. The regime supports a standardised methodology to measure the emissions of insurance underwriting portfolios.

By joining the NZIA, Lloyd’s also becomes part of the Glasgow Financial Alliance for Net Zero (GFANZ), the UN-backed group of over 250 financial firms responsible for assets in excess of $US88 trillion ($116 trillion) and committed to aligning capital with net zero.

Mark Carney, the UK Prime Minister’s Finance Adviser for COP26, says the NZIA is the “gold standard for net zero commitments and action” while UN High-level Climate Action Champion Nigel Topping says insurance will be “absolutely critical” to enabling the transition and building resilience to climate shocks.

He welcomed the Lloyd’s marketplace using its influence with market participants to full effect.

“Industry collaboration will be essential to turning commitment into implementation and achieving real world outcomes. We have no time to lose,” Mr Topping said.