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London Market passes $200bn stress test

  • Publish Date: Posted over 7 years ago

Hiscox has published a white paper analysing the London market's response to a theoretical stress test involving the costliest losses in history. The dry run scenario involved an unprecedented cyber event, a highly destructive hurricane, one of the largest ever stock market declines and a major reinsurer default with consequent delays in reinsurance payments. These simulated events resulted in extraordinary global insurance losses of approximately $200bn [£160.4bn], the biggest in history. The two-week exercise looked at the sector's ability to absorb a large market dislocation, maintain liquidity and raise capital during the period of dislocation following a market-turning event and provide the trading capabilities required to respond operationally to such losses. The scenarios were also intended to challenge companies' internal processes, decision-making and management reactions. Three recent major catastrophes were used to provide insights, these were 9/11, Hurricane Katrina and the 2011 Tohuku earthquake. According to the white paper the exercise suggested that the industry has access to sufficient resources to cope with the extraordinary losses witnessed.