The head of one of the insurance industry’s oldest institutions believes the days of natural disasters causing the greatest losses are gone.
In an interview with The Guardian
, Lloyd’s of London Chief Executive Inga Beale warned that manmade risks like terrorism, cyber-attacks and climate change have steadily outstripped flooding, fires and earthquakes as the world’s biggest threats.
“In the traditional days of insurance we used to be very concerned about earthquakes and hurricanes…These days, manmade risks are becoming the predominant risks,” Beale told the London newspaper.
Beale pointed to the Lloyd’s city risk index that indicates nearly half of economic risks faced by 301 cities are linked to manmade threats, including power outages, nuclear accidents, cyber-attacks and market crashes.
“We’ve seen an increase in manmade risks all over the world,” she stated.
Beale also highlighted the growing demand for terrorism insurance from city governments and businesses. Lloyd’s itself is likely to face some claims related to last week’s Brussels attacks, she revealed, though there are relatively few claims related to terrorism in general and carriers are unlikely to face substantial losses.
Beale’s comments come as the 328-year-old insurance market posted a 30% drop in profits last year – its worst year since 2011. Investment returns dropped from 1 billion Euros to $400 million Euros, and underwriting income fell to 2 billion Euros from 2.3 billion Euros.
The majority of losses were caused by the Tianjin, China warehouse explosion and a fire at a platform run by Mexican oil company Pemex.
Beale said that due to low interest rates on premium investments, 2016 would likely be “just as tough” as 2015. Lloyd’s made just a 9.1% return on capital – a decrease from the 14.1% return it earned in 2014.
The chief executive also spoke about Lloyd’s trajectory for the future, which includes expansion into emerging markets like Latin America and China. The insurance market already has more than 30 syndicates in the country after opening a branch in Beijing, Beale noted.