A new report published by Lloyd’s of London and Chatham House has called for regulatory caution and the need for increased research into the risks posed by future development in the Arctic
According to the Risk Insight Report, the Arctic will be the focus of ‘substantial investment’ within the next decade – possibly to the tune of $100bn. However, the report points out that gaps in regulatory structures, infrastructure and scientific research pose real risks to “the trajectory and speed of Arctic economic development”.
The report points to the need for far greater research into the Arctic environment, particularly in respect of the effects of climate change, so that Governments and private companies will be able to pursue ‘safer economic activity’ by being better able to manage their own risks.
Even with greater scientific knowledge, the report recognizes that the combination of increased environmental impact and heightened political sensitivity to disasters will make development challenging.
The impact of catastrophic events, such as an oil spill or shipwreck, is highlighted as being one of the greatest threats to Governments and businesses due to the potential environmental consequences and the difficulty and cost of clean-up may be ‘significantly greater’.
It is also suggested that the Arctic Council (Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States), in conjunction with various industry groups, begin formulating rules and regulations on what constitutes appropriate development.
The paper concludes that risk managers and insurers will play a major part in Arctic development, and that companies operating in the Arctic in the future will require the most robust of risk management frameworks and processes.
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