The London insurance market plans to test its response this month to a major catastrophe on the scale of the 9/11 attacks, the chairman of insurer Hiscox said on Tuesday.
While insurers have coped with regular hurricanes, earthquakes and terrorist attacks in recent years, the industry feels there is a need to test how it would react to a disaster of the magnitude of the 2001 attacks on U.S. cities that killed nearly 3,000 people.
After being given test scenarios, insurers and brokers will hold meetings over two weeks starting Oct. 30 to plan how they would respond to customers and check issues such as the impact of huge claims on their capital positions, Hiscox Chairman Rob Childs told Reuters.
He did not specify whether the exercise would involve a natural disaster or an attack.
London is a leading center for insuring businesses and properties against catastrophes, mainly through the Lloyd’s of London market.
Although there have been devastating natural disasters, including Hurricane Katrina in 2005, Childs said the 9/11 attacks had a particularly big impact due both to insurance losses of $40 billion and the fear they generated.
“How one deals with a major catastrophic event is moving out of folk memory,” he said.
“The people who did it before have forgotten what they did, the people making the decisions now were probably still in school. We need to run through a process and flush out any issues.”
Hiscox is spearheading the simulation, which will involve around 10 insurers, along with brokers, ratings agency S&P Global and Lloyd’s of London.
The Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority, which together regulate the British insurance industry, will act as observers.
Consultants McKinsey are running the tests, and will publish results early next year, Childs said.