It could create an annual total of $125bn (£99.4bn) additional insurance-related spend by 2030 for the costs of transition alone

The global transition to net zero carbon emissions could potentially double the size of the London insurance market, MPs heard last week (25 April 2022).

Speaking at the All-Party Parliamentary Group on Insurance and Financial Services, Christopher Croft, chief executive of the London and International Insurance Brokers’ Association (LIIBA), told MPs that according to an analysis by the broker trade body the global insurance opportunity created by the transition was estimated to be in the region of $125bn (£99.4bn).

This is in comparison to the London insurance market’s current estimated value of $110bn (£87.4bn), cited in the 2020 London Matters report.

Croft said: “For the first time, LIIBA and its members have been able to quantify the level of insurance growth produced by the race to achieve net zero – and it’s a huge sum.

“If a significant proportion of that $125bn came to London, it would transform our market and London’s standing for decades to come. It will also help deliver growth in UK export earnings, UK gross domestic product and employment.”

Once in a century opportunity

LIIBA’s analysis is based on data from international management consultancy Oliver Wyman which found that achieving net zero will necessitate $5tn (£3.9tn) of global investment in green energy annually by 2030.

LIIBA also worked with its members to determine the average ratio between insurance premium and total investment for relevant capital projects.

Overall, this suggests an annual total of $125bn (£99.4bn) of additional insurance-related spend by 2030 for the costs of transition alone.

Croft added: “The positive news is that the London market is well-placed to be right at the fore of this transformative process. London’s brokers have a unique combination of skills and expertise that will enable their clients to make the changes necessary to achieve the net reduction in carbon emissions required.

“The key for London is to ensure we seize upon this once-in-a-century opportunity by brokers and risk carriers working together to give clients the guidance and the capital backing they need to embark on this transformational journey.”

Likewise, Craig Tracey MP, chair of the All-Party Parliamentary Group on Insurance and Financial Services, said: “This new LIIBA analysis shows the huge potential opportunity net zero is creating for the British economy.

“As a world leader in risk transfer and risk mitigation, there is a unique space for [the UK to] use this expertise and be at the forefront of enabling the global drive towards low carbon and no-carbon technologies.”

On a similar note, Gerry Grimstone, minister for investment, said: “As the largest global centre for speciality and commercial risk, the London market has continued to attract international investment for decades.

“So, it’s great that London’s role in building climate resilience in the race to net zero could significantly see an increase in our market’s opportunities, and in turn boost jobs and benefit the UK economy.”

However, mitigating risk associated with the transition to net zero will mean both investment and adoption of new technology, management of stranded assets and insurance expenditure.