Lloyd’s plots war games; won’t miss Russia-Ukraine style risks again

Lloyd’s and the London market Association (LMA) will run war games to identify and mitigate more of the type of unexpected aggregations and risk accumulations that have been exposed following Russia’s invasion of Ukraine.

“Lloyds, in conjunction with the LMA, are developing a set of realistic disaster scenarios that will cover risks arising from the geopolitical tensions between China and Taiwan and the ensuing impact on US relations,” Lloyd’s chief of markets Patrick Tiernan (pictured) said during Lloyd’s Q3 market message.

The conflict simulation will come as part of a system of “cross-class scenarios” needed to unearth hidden risk aggregations. “We need to learn the lessons [of the Ukraine war] and be thoughtful of potential steps we can take to bolster the market’s preparedness for emerging risks.”

The China-Taiwan simulation requires urgency, Tiernan indicated.

“This needs to be done on an expedited basis,” he said to justify a Q1 2023 deadline for data collection from syndicates. “We cannot justify delaying this exercise into the second half of next year.”

Beyond geopolitical tensions mimicking the Russian invasion, Lloyd’s exercises will cover the macroeconomic spillovers, Tiernan indicated, citing supply chain disruptions “and other catalysts” on inflation and other forms of economic disruption.

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