London’s insurance industry has engaged in its latest “war game” - A cyber attack that cuts power to 93m people, a stock market crash of 16 per cent and a category five hurricane that damages 1.8m buildings around Miami. All occurring in the space of a fortnight and causing the largest insurance loss in history, $200bn.
A total of 17 insurers and brokers including Hiscox, Aon, RSA and Lloyd’s took part in the voluntary exercise, which was set up to probe the industry’s operational readiness as much as the financial consequences of the loss. The results showed that the industry believes it is well prepared financially for such a catastrophe. Insurers were confident that both capital and liquidity would hold up well and that any holes could be repaired quickly. But the test also found that some long-held assumptions about the consequences of big losses are no longer valid. For example, the insurers acknowledged that they could no longer be sure that hefty price increases would follow large claims.