Piracy, cyber-crime and climate change – bringing NATO and insurance together

At first glance, NATO and Lloyd's of London might seem like strange bedfellows.

By Lord Levene and Anders Fogh RasmussenPublished: 10:31PM BST 30 Sep 2009
Maybe at second glance as well. But both are in the business of anticipating and managing risk: Lloyd's for the businesses and individuals that it insures across the globe and NATO for its 28 member states.
We share a common goal – to adopt a fresh approach to managing risk and three risks in particular: cyber-security, piracy and climate change. These are not entirely new problems. What is new is the scale and the cost.
Dependence on technology has always meant assuming risk – look what happens to a city during a blackout. The reach and penetration of information technology into every aspect of our lives means that when the system goes down, the costs are enormous: for companies that can't operate; for governments that can't provide basic services, including security; for ordinary people who can't take money out of the bank. And if anyone thinks this is scare-mongering, they should look at what happened in Estonia in 2007, when it came under a sustained cyber-attack.
Piracy is something most people associate with history books and Hollywood movies. But it is a real and growing problem. Today, we depend on international shipping much more than we ever did; 80pc of the world's goods move over the seas. One fifth of that passes through the Gulf of Aden, and is at risk every day from pirates.
Today, four ships are being held hostage and 79 people are being held for ransom. The number of attacks has increased by just under a third in the first half of this year alone. All of this has cost businesses and insurers hundreds of millions of dollars so far, and forced countries from around the world to deploy their navies to the area.
Climate change is, of course, the biggest risk of all. Humans have always fought over resources and land. But now we are seeing those pressures on a bigger scale, and at a faster pace, than ever before, as ice caps melt, sea levels rise and populations move. Scarcity of natural resources is set to be a growing security problem.
We believe that the time has come for us to move past analysis and protracted debate. The problems are clear. What we need are solutions. These risks can be managed – but to do so effectively we will need to change the way we have operated until now.
First and foremost, we believe that the time has come for a much more open and more systematic collaboration between government and business when it comes to managing risk. Piracy, cyber-security and climate change have business and political origins – tackling them effectively will mean a partnership between business and government. We have already made a start: industry leaders, including those from Lloyd's, have been involved in the current process to develop NATO's new guiding charter, the Strategic Concept; indeed, the vice-chair of the group is the former chief executive of Shell, Jeroen van der Veer.
Second, we need to invest much more in research and in planning. Experts in industry and in government tend to be better at analysing past patterns than predicting future trends. This needs to change. We must be prepared to think the unthinkable. Lloyd's developed its 360 Risk Insight programme and its Realistic Disaster Scenarios, and NATO its Multiple Futures project, precisely to lift our eyes from the present and scan the horizon for what might be looming.
Third, we need to invest in mitigating risks. From an industry point of view, risk management needs to find its rightful place in the boardroom and businesses need to manage much more effectively the risks that face them. Insurance cannot be seen as a substitute for effective risk management. It can, of course, be part of a businesses approach but if people want to build a home or factory on a fault line, or a flood plain, insurance is likely to cost them more. If they adapt their property to mitigate the danger, then this is likely to be reflected in the cost of insurance cover.
For their part, governments need to do some contingency planning as well; including focusing intelligence assessments on climate change, tasking military planners to incorporate it into their planning as well, and reinforcing all the facilities at risk from storms and floods. They also need to step up their cyber-defences, as NATO has done in creating a deployable cyber-defence capability that can help its members if they come under attack.
Our long-term strategy must be to tackle the causes of these risks – whether it is reducing CO2 emissions, or addressing instability in Somalia – but, for climate change, at least, we have to accept that some of the effects are now irreversible.
We cannot, for the foreseeable future, stop the earth from getting warmer, or eliminate the root causes of piracy, or stop cyber-criminals from launching their botnets and malware. But we can minimise their effects – for industry, and for ordinary people. And the recipe is clear: better planning, wiser investment and stronger collaboration between business and government.
Lord Levene of Portsoken is chairman of Lloyd's of London and Anders Fogh Rasmussen is Secretary General of NATO.