Insurers must “speak truth to power” on climate change: Canada’s former PM Harper

Canada’s former prime minister has said the global (re)insurance industry has a critical role in speaking “truth to power” when it comes to tackling the impact of climate change because of its investment in data, models and analytics to understand cat risk.

Speaking alongside Lloyd’s chairman Bruce Carnegie-Brown, Stephen Harper acknowledged the industry’s ability to influence behavioural change among its customers but he also urged carriers and brokers to use their knowledge and understanding of climate risk to influence sensible policy.

The former Canadian Conservative leader – who has built a successful career as an energy investor and consultant since stepping down in 2015 – said (re)insurers’ experience in measuring risk and building data sets puts them in a privileged position. 

“I think to be frank that the role of the insurance industry is essentially to speak truth to power,” Harper said on a panel discussion chaired by The Insurer.

“To the extent that [(re)insurers] have data, I think it’s really important. So often these climate discussions don’t have data in them and they range sometimes from complacency to alarmist. Data can bring us into the middle of where the risks really are,” he continued.

During the debate, Harper and Carnegie-Brown both identified examples of flawed energy and climate policies that with hindsight clearly lacked rigour, highlighting the importance of objective scrutiny and applied long-term thinking.

“I think one of the keys here, particularly given the long timeline we’re looking at with climate, is consistency of policy over time. In the United Kingdom in the last 20 years, you had a government telling you that diesel cars were better than petrol cars, based on some data that turns out to be not helpful at all. And suddenly we’re told that’s not so good and we’re moving in a different direction,” Carnegie-Brown explained.

The Lloyd’s chairman added: “That’s where I think the private sector [such as insurers] needs to talk to government more … ultimately governments can’t make it happen alone and the private sector can’t do it alone.”

Harper agreed, using the topical example of governments making energy decisions “on the basis of short-term political considerations”.

Without actually mentioning Germany by name, Harper commented: “You can’t decide that simultaneously your number one priority is to reduce emissions and another priority is to reduce nuclear power.

“So now we have this crisis, which was not entirely unpredictable, and you actually have … talk of recommissioning coal mines.”

Both agreed that the focus should be on energy technology innovation.

“Look, the only way this can be achieved, any of these targets can be achieved, is the development of energy transition technology that at scale is in the same ballpark of cost effectiveness as the traditional fossil fuels.”

Harper continued: “It’s clear what we need. What we need are a series of innovations that allow us to have a high energy producing economy at low cost but with low-emitting technologies. And we know what some of them possibly are: the development of longer battery technology, carbon sequestration, carbon extraction from the environment, the development of low-carbon products and fuels.

“But merely imagining these things does not make them exist.”

Carnegie-Brown highlighted the role (re)insurers can play in supporting technology and innovation: “Happily at Lloyd’s we have a stronger reputation than the industry as a whole for innovation although I think the industry itself needs to be more innovative than it is.”

He used the example of research around the potential of hydrogen. “What everybody knows is that hydrogen is incredibly flammable. So trying to bring issues of safety in alongside insurance is part of us being willing to insure it, which then gives people the confidence to adopt this new energy source.”

Where Harper and Carnegie-Brown did deviate was the deadline of 2050 for net zero, which has become a shibboleth for many policymakers.

“Let’s be clear about this. Technologically – today – there is no way of achieving that, that is unachievable,” explained Harper.

“I should qualify that by saying it’s unachievable unless you are prepared to see a significant shutdown of economic activity and a significant lowering of standards of living around the world,” explained Harper.

Canada’s 22nd prime minister paused briefly, before remarking drolly: “I exclude that as a reasonable scenario.”

Harper also criticised policymakers and politicians for setting climate targets with little understanding on how those goals can be met. 

“I find this a very unique area of public policy whereby we think that just by setting targets you will achieve something. So we set targets and we don’t understand how to meet them, then we fail to meet them and then every time we fail to meet them we come up with a more ambitious target as a solution. So we now have a target of net zero in 2050.”

Where Harper and Carnegie-Brown did deviate was the deadline of 2050 for net zero, which has become a shibboleth for many policymakers.

“Let’s be clear about this. Technologically – today – there is no way of achieving that, that is unachievable,” explained Harper.

“I should qualify that by saying it’s unachievable unless you are prepared to see a significant shutdown of economic activity and a significant lowering of standards of living around the world,” explained Harper.

Canada’s 22nd prime minister paused briefly, before remarking drolly: “I exclude that as a reasonable scenario.”

Harper also criticised policymakers and politicians for setting climate targets with little understanding on how those goals can be met. 

“I find this a very unique area of public policy whereby we think that just by setting targets you will achieve something. So we set targets and we don’t understand how to meet them, then we fail to meet them and then every time we fail to meet them we come up with a more ambitious target as a solution. So we now have a target of net zero in 2050.”

Carnegie-Brown, however, made the point that timetables can still be useful in focusing minds.

Pointing to the example of President Kennedy in the early 1960s, he explained: “In terms of landing on the moon, you put something out at the beginning of the 60s and you have no idea how to achieve it but with the right kind of ingenuity you get there in 1969.”

But he acknowledged the climate issue is “altogether more complicated”.

“[This] isn’t about one country’s idea of itself investing unlimited dollars in moving in a particular direction, you’ve got to engage a huge number of countries with very different economic models at very different stages of their development … So it is uniquely difficult.”

(Re)insurers are adopting different strategies around carbon transition with those in Europe typically moving faster in setting policies around energy underwriting.

Lloyd’s – which under the leadership of CEO John Neal has sought to take an industry leadership role on climate, forming the Sustainable Markets Initiative Insurance Taskforce with Prince Charles last year – has itself has faced criticism from some eco-activists over allegedly backpedalling on its own timetable commitments around carbon underwriting. Its own unique difficulty is that the near-350-year-old market is constrained by competition law about what it can and can’t mandate its syndicates to write.

Carnegie-Brown could not be tempted into criticising the extremists despite protests earlier this year resulting in the closure of the underwriting floors, remarking generously: “I actually think these activists have a role to play that’s quite good. Reasonable people always find a way to adapt so you need unreasonable people to bring about change. And we clearly need some change in our perceptions about the impact of the way we behave in our everyday lives.

“The piece I slightly resist is that they tend to be single project focused so they find a project and make a huge case out of it and then they move on to another project. I don’t think this [issue] can be addressed on a case-by-case basis.”

Sympathising with the challenges of modern businesses operating in a world of social media and protest, Harper advised insurers to be thoughtful in developing policies and also resolute in standing up for them.

“You can’t ignore it, you shouldn’t ignore it and you can’t be reactive. On the other hand, I think the reality that we have to face is neither can you just [give in] to the demands of activists, which are often completely disengaged from reasonable considerations.”

Harper was speaking at the RPC/The Insurer organised Global Access Conference event in London. One of Canada’s most successful leaders, a combination of political astuteness and “incrementalist” conservative policies saw him win three back-to-back terms. 

He effectively formed the modern-day Canadian Conservative Party and was elected prime minister in 2006, remaining in post until 2015. His administrations emphasised economic growth using fiscal policies to stimulate it.

This article was first published by The Insurer on 6 September 2022.