Lloyd’s has released a new report to help insurers and risk managers navigate the significant overlap between geopolitical risks and climate change. Shifting powers: Climate cooperation, competition or chaos? is the second in Lloyd’s series of reports produced in partnership with the Cambridge Centre for Risk Studies, and uses potential but plausible scenarios to identify geopolitical risks associated with climate change.

The report suggests ways for insurers to ease tensions between national power blocs by providing risk solutions for regional energy and agricultural projects which can bind the international community together.

Using the theory of ‘climate diplomacy’ – the strategic cooperation or competition of states towards climate-related goals – the report assesses global political developments in the coming century and changes in risk which could occur from various outcomes of the global energy transition process. The report concludes that while it is likely friction between like-minded states could lead to a ‘Green Cold War’, nation states are expected to inevitably unite through a blend of cooperation and competition to tackle the challenges posed by climate change.

The research outlines collaborative initiatives already underway and highlights the key role of insurers as partners that can offer valuable insight in projects such as the new and innovative multi-national climate projects such as the Australia-Asia Power Link, which will connect regions together through sustainable energy sources.

It also highlights how breakthroughs in renewable energy storage and technology will become vital in global business as well as symbols of influential partnerships between nations. It says insurers are already using their expertise to help businesses manage their increased political risk exposure and are developing new insurance products to protect against geopolitical and systemic risks.

Bruce Carnegie-Brown, chairman of Lloyd’s, said: “The insurance industry has an important role to play in insuring the transition to a greener world. Undoubtedly, geopolitical risks and frictions between international communities add a layer of complexity in tackling climate change. We know businesses are looking to global leaders and diplomatic agreements for the pathway forward, but we are also acutely aware that businesses have a responsibility to play a leading role in the transition. We are using Lloyd’s convening power to collaborate with our partners globally and create insurance products that will enable a more sustainable world.”

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