It seems almost certain that smaller, poorer countries will suffer the effects of climate change much more than the larger prosperous countries that caused the problem. Developing economies are likely to be hit by both the physical risks of extreme weather events and by the collapse of their industries when there is no more call for the natural resources on which a country’s economy has been built.
Collaboration will take us a long way to solving some of the issues and there are some major international groups linked to the insurance industry that are already working together. Quite right too – if we continue on our current pathway, a profitable insurance industry could become a thing of the past as the physical risks become so unpredictable as to be virtually uninsurable in the latter half of this century.
Whole new economies need to be built: a hydrogen economy, batteries at scale, continuing the drive for wind and solar, carbon capture, transforming agriculture, etc. All of this requires significant collaboration. There is a need to share best practice and improve supply chains but that is where competition law can become a problem. In theory, collaboration could produce detriments for consumers, such as prices increasing (although that will hardly matter if planet becomes uninhabitable), and the law requires evidence that consumers will benefit in some way from collaboration.
Competition law is an inhibitor and regulators are being pressed to provide guidance on how to strike the balance. In March, the European Commission launched a consultation on some proposed guidelines. This was followed by a consultation by the UK Competition and Markets Authority to see if any legislative change is required. The existing UK legislation provides some exceptions for ‘progress’, which might apply to sustainability. The view has been expressed that case law could evolve effectively in the UK, but this will take far too long and a sustainability taskforce is already looking into the issue more generally and is expected to report back shortly.
As investors, underwriters, employers and purchasers, insurers wield a very powerful set of influences that can be brought to bear on behaviours that affect the environment and they must be allowed to use that influence positively and in conjunction with each other where appropriate without fear of breaching competition law.
The UN has already been active in creating platforms for collaboration especially among insurers, but what of other international organisations? What part could the Commonwealth for example play in supporting, facilitating and enabling productive collaboration across the insurance industries in its 56 members?
The Commonwealth seems to have undergone something of a makeover in recent times. There is no getting away from the fact that it has in the past been seen as a slight backwater of the British Empire and a reminder of colonialism – a sort of ‘sorry’ from England to the rest of the world. If this was ever the case, which frankly I doubt, it is certainly not the case now, particularly post-Brexit and as China ascends and the US reduces in influence and money.
It enjoyed much positive publicity and discussion during the Platinum Jubilee celebrations and the recent Commonwealth heads of government meeting in Rwanda was attended by many pages of largely supportive press coverage.
The Commonwealth has flourished into a nurturing collaboration of 56 countries working towards shared goals of prosperity, democracy and peace. Almost all member countries have English as the first or second language, enjoy democratic rule and have similar systems of English-based law and thus the standards behind that law based on both Roman law and Christian principles.
However, the wealth of some members of the Commonwealth is microscopic compared to some of the others. For example, the smallest member state Nauru in Micronesia, northeast of Australia, has a population of just 10,000 and the largest, India, has a population 140,000 times bigger. There are 42 “small states” (population less than 1.5 million) in the world and of these, 32 are members of the Commonwealth. Many of these small states are most at risk from the worst effects of climate change.
There is a major absence of cover in many of these less developed countries. It is estimated that of the African country Commonwealth members, apart from South Africa, 98% of the people and small businesses are uninsured. There is here a huge opportunity to deliver some protection, for example microinsurance, to hundreds of thousands of businesses and millions of individuals. This protection would encourage more SMEs and startups, thereby helping to reduce poverty and protecting against some of the worst effects of climate change. Collaboration among countries is much less prone to fall foul of anti-competition law and it follows that the Commonwealth countries should not be inhibited in that way.
Given the long history of the Commonwealth and the critical role of the insurance industry to one of its core objectives – environment protection – one might suppose a Commonwealth forum specialising in insurance has long existed. In fact, the Commonwealth Insurance Forum (CIF) was only formed in 2019. It was formed by Francis de Zulueta and Robbie Lyle with support from the Chartered Insurance Institute (CII). The CII is now an accredited member of the Commonwealth as a training body, to ensure that insurance is now part of the Commonwealth agenda going forward and works closely with CIF in that overall aim of promoting all aspects of insurance throughout the Commonwealth.
FOIL, the Forum of Insurance Lawyers to which 95% of UK insurance law firms now belong, is working alongside CIF to promote this important work. All of FOIL’s 42 UK member firms have committed to supporting the insurance industry as it transitions to sustainable underwriting, employment, investment and purchasing practices, as well as working with each other collaboratively to develop plans to bring their own firm’s carbon emissions down to net zero. Working with CIF is a natural next step.