Developed countries such as Israel, with its leading role in hi-tech industries and innovation, face emerging dangers related to digital and climate security risks, according to Lloyd’s of London, the world’s largest insurance market.
“Innovation always involves risk,” Lloyd’s of London chairman Lord Peter Levene said in an interview with The Jerusalem Post in Tel Aviv this week. “Digital risk is an issue which is particularly relevant for Israel, with its leading role in hi-tech industries. The challenges for the digital sector is very similar to what happened in the 19th century during the industrial revolution.
“Society found it difficult to keep up with the speed of development of the new technologies and to manage the inevitable new risks. The digital revolution has brought a wide range of new risks. Whether it is a thief breaking into your PC and stealing credit-card details, an organized attempt to attack a state, as we saw in Estonia in 2007, or a simple case of the technology malfunctioning, a new risk landscape is being created.”
(The Estonian Cyberwar consisted of a series of cyber attacks that began April 27, 2007, and swamped Web sites of Estonian organizations, including the legislature, banks, ministries, newspapers and broadcasters, amid the country’s row with Russia about the relocation of the Bronze Soldier of Tallinn, a Soviet-era grave marker, as well as war graves in Tallinn.)
The former lord mayor of London was in Israel for a conference on the new world of risks following the global financial crisis. Lloyd’s insures a wide range of industries in Israel, including parts of the hi-tech sector, medical and life sciences, industrial sector and the diamond industry.
Lloyd’s has recently started to discuss the emerging risks with business communities in London and New York relating to digital issues and to the known and hidden dangers of climate change, which are among the biggest risks that today’s companies face, Levene said.
“We have been talking to businesses and governments about how to manage these risks, whether it is through insurance or simply better security measures,” he said. “And given the amount of time that we all spend living and working in cyberspace, developing and extending products in this areas, they will be a key feature of insurance in the next decade. Finding solutions is important to society, too, as it is not in any of our interests for the IT revolution to be stopped whilst we grapple with how to deal with the new risks.”
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Climate security presented the biggest risk to insurers, Levene said.
“For that matter, to us all,” he said. “Israel has had to live with the reality of scarce water since its foundation. Not far from where we are here, in Tel Aviv, lies the desert. The need to develop agriculture and achieve food security, despite these harsh conditions, has led to many innovations. The drip irrigation developed on early kibbutzim is now seen across the globe. Every Israeli understands the need to conserve water, and you simply have to look at the Tel Aviv skyline to see the efforts being made to use solar power.”
During his visit, Levene, who drives an electric car in London, visited the Better Place electric-car project at Pi Glilot to test drive one of the electric cars.
“Soon, the world’s first electric-car network will be set up – not in Copenhagen, or London or Sydney, but in Jerusalem,” he said. “Motorists will be able to drive 140 miles without recharging, and stations will be set up across the country, where an empty battery can be replaced with one fueled by solar technology.”
Lloyd’s insures about 25 percent of the world’s wind farms and is in close dialogue with governments, lobbying to share climate data, and to see international action, not just on carbon-dioxide emissions but also on how societies that are most vulnerable to climate change can adapt their homes and their businesses.
“Because if they don’t, it will be our industry that picks up the bill for extreme weather as it becomes more frequent,” Levene said.
Lloyd’s pays out about £10 billion in claims a year. However, recent hurricanes in North America and other natural disasters have led to even higher claims. Levene said despite the array of high claims, Lloyd’s, like Israel, has weathered this recession well.
Levene warned that too much financial regulation would hamper global competition.
“The main problem is that until now nobody has devised what the perfect
model is,” he said. “I believe that we need good regulation, better
regulation, but not more regulation. If you take all risk out of
business there is no business.
“The recent financial crisis showed the danger of too little
regulation, but we should not forget that too much regulation also
creates a problem. It can make industry uncompetitive, and that
ultimately drives up prices for the consumer and even deprives them of
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