LMA report reveals fundamental shift in climate transition assumptions

The Lloyd’s Market Association (LMA) has revealed a fundamental shift from last year’s climate transition assumptions.

The second edition of the LMA commissioned report entitled ’Underwriting the Transition’ was released today (3 March 2026) in collaboration with KPMG.

Both editions map decarbonisation pathways, identify how insurers can support a managed transition and outline how first-party property coverage must evolve to address changing climate risks.

It was revealed in 2025 that the average increase in global temperatures has now exceeded 1.5°C and the consensus following COP30 in Belém is that the risk of a “disorderly transition” has heightened.

The LMA said that the insurance market must now navigate intensifying physical risks and an evolving transition risk profile.

Paul Davenport, finance and risk director at the LMA, said: “For over three centuries, the Lloyd’s market has been the global laboratory for risk. Lloyd’s managing agents are already underwriting the climate transition.

”We are not just observing – we are actively supporting our clients across different sectors and industries as they navigate decarbonisation and adaptation.”

What has changed?

Four key areas of change identified in the second report include a rising global energy demand, artificial intelligence (AI) emerging as both an enabler of the energy transition and a driver of new systemic risks, observed extremes increasing in severity and affordability reshaping national energy policies. 

Having led the research for the report, Josh Holbrook, director of sustainability at KPMG UK, said: “The world has changed since we published our first report in October 2024.

”This second iteration provides an updated viewpoint across the transition sectors that are also key to Lloyd’s underwriters. In doing so, it provides deeper insights into the implications for underwriters, both in terms of opportunities and risks arising from the transition.”

Davenport added: “Lloyd’s will continue to be the market to which these complex and emerging risks come for solutions.

“In the years ahead, the LMA and KPMG expect to continue monitoring and reporting on shifts that occur in government policies, regulation and in the portfolios and risk profiles of Lloyd’s market participants.”