Tag Archives: $200 billion

Insurers’ Vulnerabilities

Catastrophic Insurers’ Vulnerabilities:

A test on January 31st 2017 examined the insurers’ vulnerabilities.

A combination of a cyber attack, U. S. hurricanes and the failure of a reinsurer could therefore result in extreme insurers’ vulnerabilities in the insurance industry. These tests showed that Insurers could furthermore lose up to 120 per cent of their net capital base. The loss could be in the region of $200 billion. However, in spite of this they would not be put out of business.

Simulations:

Catastrophe simulations were performed in London in November 2016. These were staged by nine insurers and reinsurers. The simulations dealt with a cyber attack on power grids across 15 U.S. states. Furthermore, a 16 per cent downward trend in global stocks. In addition a category 5 hurricane over Miami and Florida. Also, a failure of a major reinsurer.

These tests were led by Robert Childs, the chairman of insurer Hiscox. Observers of the simulation to test vulnerabilities were the Prudential Regulation Authority, the U. K. Finance Ministry and various rating agencies.

The amount that would be lost would be more than twice the size of losses caused by Hurricane Katrina. Furthermore, at least four times larger than the World Trade Centre insured loss.

The following recommendations are to be adopted by the London Market:

1. To ensure that customers are offered efficient internal processes to react efficiently to market-turning crises.
2. Also form crisis management training programmes.
3. Ensure as well that a dynamic response has been tested and is in place.
4.  In addition have plans to raise additional capital following a critical event.

In conclusion, the London Market is to maintain its leading position and expertise in the global marketplace by strengthening Lloyd’s position and proactive stakeholder interactions.