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Companies must analyze climate risk: Levene

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TOKYO, Japan— The threat of climate change needs to be an integral part of every company's risk analysis according to Lord Peter Levene, chairman of Lloyd's of London.

"Risk — and the skills and training to analyze, manage and prepare for it — needs to be high on the agenda of any board or management team, and the climate needs to be a more important factor within that strategy," he said, , speaking at the British-Japanese Chamber of Commerce in Japan earlier this week.

Lord Levene told the Chamber of Commerce that, "weather-related catastrophes are costing the insurance industry more than ever before," and that while there will be quiet seasons for the industry, such as 2006, "the forecasts suggest that these will be fewer than before, with more active seasons leading to larger losses."

The insurance industry must model and prepare now for the increased financial losses that these catastrophes may bring, Lord Leven noted.

"Our key concern must be to make sure that we are strong and robust enough to protect our policyholders and pay their claims," he said.

Lord Levene was keen to point out that climate change was not a remote threat, but something that would take effect "within our own lifetime," and consequently, the insurance industry, and indeed the wider business community as a whole, need to take action now.

"The latest science suggests that climate change is likely to bring increasingly dramatic and possibly rapid effects at a local level, which differ in their intensity and even in their outcomes," he argued.

He praised Japan for the progress already being made in the fields of environmental technology, pollution control and energy efficiency, and noted that the European Union too has, "been working hard to reduce emissions," but warned that, "all our work will count for nothing unless the rest of the world can follow suit. That includes Asia and it includes North America."

Lord Levene added that climate-friendly behavior did not mean that, "the growing economies of Asia or anywhere else should forego the benefits of economic growth that many of us in the developing world have taken for granted for so long."

He also noted that climate-friendly behavior would have business advantages and become "a source of competitive advantage... Investor expectations will drive both higher standards and greater transparency."