Reclaim Finance calls on Tiernan to ban underwriting fossil fuel expansion

By Rebecca Delaney

June 2 - (The Insurer) - Environmental campaign group Reclaim Finance has urged Patrick Tiernan to show bold climate leadership in his new role as Lloyd's CEO.

In an open letter published on Monday, the group called on Tiernan to use his "unique position" in the specialty insurance market to prevent escalating physical climate risks.

"Analysts caution that as the protection gap widens, governments will oblige insurers to shoulder even more of the climate bill. In short, your balance sheet now depends on preventing and not only pricing climate risk," said the letter.

Reclaim Finance said prevention should begin with curtailing insurance coverage for new fossil fuel infrastructure, including new coal, upstream oil and gas, and midstream oil and gas projects.

"This represents our best chance to limit global warming below 1.5°C and avoid its worst consequences. Yet fossil fuel build-up continues at pace, facilitated by the insurance industry. And Lloyd’s of London remains a central hub for the insurance of fossil fuels," the letter continued.

A report by Reclaim Finance in October 2024 alleged that more than half of the Lloyd’s market by premium share (51.2%) is yet to publicly adopt underwriting restrictions for new coal projects, with 28 managing agents labelled “ultimate laggards” for having no underwriting policies for new fossil fuel infrastructure.

LEADERSHIP

The open letter referenced Lloyd's cooperation agreement with the Prudential Regulation Authority, which sets out the Corporation's responsibility for the "overall strategic direction" of the market, as well as oversight of how much and what type of risk is allowed into the market as a whole.

Tiernan's predecessor John Neal announced in 2020 that managing agents would be asked to no longer provide new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities from January 1, 2022. However, Reclaim Finance argued that enforcement of these requirements has since been "watered down" to guidelines.

The letter added that it hoped to see "the same foresight and leadership" from Tiernan as in his previous roles as managing director of global corporate and specialty and UK commercial lines at Aviva, during which time the UK insurer exited the standalone fossil fuel power market and launched package covers for renewable energy.

In the letter, Reclaim Finance called on Lloyd's to immediately require all managing agents to cease underwriting fossil fuel expansion, beginning with new coal infrastructure.

It also called for the Corporation to make the formation of a new managing agent conditional on submitting an underwriting strategy that is aligned with the market's net-zero commitment by 2050.

Other demands included requiring all managing agents to disclose their underwriting policy for risks related to new fossil fuel projects as part of a published annual sustainability strategy, as well as monitoring and reporting a summary of all managing agents' policies on coal, oil and gas, and LNG in Lloyd's annual ESG report, with enforcement mechanisms and sanctions for failure to comply after a one-year deadline.

"We are entering a dangerous phase. While 2024 saw yearly average global temperatures more than 1.5°C above preindustrial averages for the first time, the political consensus on the need for climate action is breaking down," the letter concluded. "Now, more than ever, sober analysis and bold leadership are needed. We are counting on you to provide it."