The Chairman of the Lloyd’s Tercentenary Research Foundation, has welcomed the publication of two reports today with a warning that the potential for major disaster is on the rise.
Dominic Christian, (pic) who is also Global Chairman of Aon’s Reinsurance Solutions business was speaking as The Lighthill Risk Network Ltd (Lighthill), launched the reports, Developing Scenarios for the Insurance Industry and Developing Scenarios for Disaster Risk Reduction, in partnership with the Cambridge Centre for Risk Studies and co-funded by the Lloyd’s Tercentenary Research Foundation.
Mr Christian said: “From climate change, which disproportionately impacts developing countries, to the rapidly evolving field of cyber risk – the potential for disasters to cascade through systems is increasing.
“It is critical that the insurance sector as well as governments and disaster risk management agencies have a common framework for best practice when considering and planning for potential catastrophic shock scenarios.”
“Reducing disaster risk requires powerful and concerted cross-sector effort if we are to develop strategies to better understand and manage risk, and ultimately improve resilience,” he added. “I welcome the launch of this duo of reports and the laudable collaboration between the insurance community and academia that they represent, and I hope they will support scenario development best practice and further conversations between the insurance and risk management sector, governments and academia going forwards.”
The reports provide practice scenario planning tools for the insurance industry and governments, particularly of developing countries, when considering the outcomes of catastrophic shock risk scenarios.
Lighthill said scenarios are increasingly being used by underwriters, analysts, risk managers, actuaries, and other stakeholders in the re/insurance community to better understand and stress test the characteristics and consequences of unknown, uncertain, or unexpected future events.
Developing Scenarios for the Insurance Industry addresses scenario best practices in the insurance industry, with the case study example of a Cyber Blackout event, exploring the interlinked nature of such events and its global financial ramifications.
Developing Scenarios for Disaster Risk Reduction addresses the ever more complex and interconnected disaster risk landscape, with the potential for disasters – including natural catastrophes – to cascade through global systems increasing, with disproportionately negative impacts on developing countries.
Professor Danny Ralph, Academic Director of the Cambridge Centre for Risk Studies, said: “Scenarios are a critical tool to address and understand an increasingly complex landscape of systemic and emerging risks. We use scenarios to engage effectively with organisations, capturing creative thinking about plausible futures.
“Scenarios should be understood not as predictions but as stress tests to assess an organisation’s capacity to be resilient. In the context of disaster risk, scenario analysis is widely advocated and applied but remains a challenge to many stakeholders without experience in scenario development. We hope to support a wider application of scenarios to understand potential disaster impacts and the efficacy of decisions to address them.”