In 1915, Cuthbert Heath – pioneer of catastrophe insurance at Lloyds of London, decided to offer insurance policies to cover the impacts of war, far from the front line. Zeppelin airships were arriving over London during World War One, dropping bombs and incendiary devices. Later in the War, the bombs were being thrown out of Gotha biplanes.
Heath did some simple calculations: the number of Zeppelins, the frequency of attacks, the number of bombs each airship could carry, the damage area of an explosion, and how much of London was built up compared to open spaces. Having generated a risk cost estimate, he then multiplied it by six to arrive at his proposed rate for the insurance coverage. As the intensity of air attacks went up and down so his insurance prices followed.