Posted on July - 13 - 2010 by
One of the reasons I enjoy writing about business insurance is because the insurance industry is often the market maker when it comes to significant change in the world. Yes, in the era of the AIG failure and several significant ethical lapses by insurers, it is hard to regard insurers as a force of change for the good. But, history proves otherwise. Fire and building codes, as an example, were driven by insurer efforts to reduce risk. Automobile safety left in the hands of manufacturers was slow to change. Once insurers got involved, however, safety changes were implemented (how safe was your parents’ car?).
Yesterday, the Guardian posted an article concerning Lloyds recent report concerning “peak oil” and the catastrophic effect of energy shortages in a world of growing demand. The report was produced in coordination with the Institute of Strategic Studies. It can be downloaded here.
The report, entitled Sustainable Energy Security: Strategic Risks and Opportunities for Business, is stark. The report predicts major catastrophes related to oil-supply disruption with a prediction of $200 per barrel oil prices by 2013. More impressive, is the fact the report is not created by eco-activists or those with a political leaning towards environmental causes. It is drafted and publicly published by one of the world’s foremost insurance companies.
Business owners and risk managers should read this report. Dr. Richard Ward’s, CEO of Lloyd’s, introductory comments are concise and make a simple point: “Energy security requires a long term view and it is the companies who grasp this who will trade on into the second half of this century.”
Not just big businesses. Are you a small, family-owned retailer? Do you rely on the delivery of just-in-time inventory or food? What would happen if that delivery stopped. Just stopped. Is that risk insured? These are considerations that every business must focus on going into this century. Those that implement change, insure against risk, and make a fundamental analysis of what their supply chain would become if oil became scarce, are the businesses that will thrive.