Careful management of catastrophe risk is a business imperative at Lloyd’s and with total hurricane losses in the 2005 storm season of $6.6bn, it’s easy to see why.
The Corporation has devised a set of Realistic Disaster Scenarios (RDS) to stress test both individual syndicates and the market as a whole to see how they stand up to chains of accumulated exposure in very extreme cases – contemplating over $100bn of insurance industry losses.
The specified event scenarios are defined in detail annually by Lloyd’s and are used to evaluate aggregate market exposures as well as the exposure of each syndicate to those specific events. Syndicate-specific scenarios are prepared by each syndicate according to the particular characteristics of the business it writes.
Compulsory event scenarios
• Two consecutive Atlantic seaboard windstorms
• Florida windstorm
• Gulf of Mexico windstorm
• European windstorm
• Japanese typhoon
• California earthquake
• New Madrid earthquake
• Japanese earthquake
• Terrorism
Syndicate specific scenarios
• Marine event
• Loss of major complex
• Aviation collision
• Satellite risks
• Liability risks
• Political risks
• Two syndicate-defined Realistic Disaster Scenarios
