The Lloyd's Market Association (LMA) has released an updated report on climate transition risks, signalling a strategic shift in how the market approaches decarbonisation.
The second edition of "Underwriting the Transition," produced with KPMG, reveals a fundamentally altered risk landscape since October 2024, prompting Lloyd's to position itself as the marketplace for managing climate-related exposures.
Global temperatures have now exceeded 1.5°C of warming, and consensus following COP30 in Belém indicates "disorderly transition" risks have intensified. Regulators including the Prudential Regulation Authority are mandating climate risk embedding into governance and risk appetites before June 2026.
A critical emerging risk centres on data centre clustering. Goldman Sachs analysis suggests the insurance sector could generate $5 to $11 billion in annual premiums from data centre coverage – yet significant gaps remain.
Revenue loss tied to service-level agreement breaches lacks adequate coverage, whilst traditional property policies exclude electronic data loss, a core concern for operators.
The market is responding. Marsh expanded its Nimbus data centre construction insurance facility in January 2026 to provide up to $2.7 billion in cover, signalling industry commitment to scale alongside demand.
However, Rachel Turk, chief underwriting officer at Lloyd's, warned that if insurers cannot quickly provide solutions for technology giants, these risks could migrate into captive structures.
The challenge extends beyond coverage. Large data centres consume up to 19 million litres of water daily – equivalent to a town of 50,000 residents. Rising global temperatures pose mounting resilience risks to over half the world's top data centre hubs, driving increased construction and insurance costs.
Lloyd's has established itself as the premier marketplace for climate transition risk. As chair of the Insurance Task Force for HRH The Prince of Wales's Sustainable Markets Initiative, Lloyd's is convening industry expertise to insure net-zero transitions.
The market conducted a comprehensive survey to assess how managing agents embed climate considerations into reserving and capital modelling.
The marketplace is leveraging digital infrastructure for competitive advantage. Blueprint Two, the multi-year digital transformation programme launched in November 2020 with a £300 million budget, aims to reduce friction and complexity within the Lloyd's marketplace.
Paul Davenport (pictured above), finance & risk director at the LMA, stated: "The insurance industry is a critical partner in this transition. Without insurance, businesses will struggle to achieve transition goals or build resilience against climate impacts."
The LMA and KPMG indicate they will continue monitoring government policies, regulation and Lloyd's market participant portfolios to track transition evolution.
