Underwriters at Lloyd's think the time is nearing when a mega-hurricane will slam the U.S. coast and cause "$100 billion" in insured losses, Lloyd's Chairman Peter Levene said today.
Mr. Levene, a British lord, told a research group in London, "We believe a $100 billion natural mega-catastrophe is getting closer and could hit anywhere on the Atlantic Coast."
His comments came in a talk to the Royal United Services Institute For Defence and Security Studies concerning the role of insurers in the creation of resilience "for the fabric of a global society."
"You may wonder why I am talking about America at an event about the UK's resilience, but in the globalized world, what happens there impacts the rest of us," he said, according to a text of his speech on the Lloyd's Web site.
Lord Levene noted that Lloyd's insurers underwrote premiums totaling a record $12 billion of insurance and reinsurance in the U.S. last year, making it Lloyd's biggest market.
He added, "We have no doubt there needs to be much wider, open discussion generally about land use policies in disaster-prone areas and why improved standards and consistency of building codes governing the structures of new construction need to be delivered."
On another American-related issue, he remarked, "In the U.S. lately, something of a debate has emerged about the role of the commercial insurance market versus the role of state and federal government in managing risk.
"Our view at Lloyd's, based on long experience, is very clear. Insurance markets operate most effectively and most efficiently when left to free market forces. In the case of natural catastrophes which can be modeled with an increasing degree of accuracy, exposures can be managed. Of course, two major caveats apply here: insurers must be allowed to price risk according to the underlying exposure, and the models should be used in conjunction with–not as a substitute for–your own independent analysis."
Lord Levene in his wide-ranging talk said "insurers and society alike need a deeper understanding of precisely what the key threats are to our stability." He mentioned economic shocks, terrorism, attacks on the energy supply and technology risks.
When it comes to taking risk management steps, he commented that there is a gap between awareness of problems and action, "almost one quarter of all companies have no continuity plan at all," he said, citing Lloyd's research.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.