Praedicat, the liability emerging risk modeling firm, has developed a suite of scenarios for the casualty insurance market that allows insurers to track exposures, establish reserves, and manage aggregations.
The scenarios were specifically designed to help insurers that have a clash risk from coronavirus that impacts general liability and directors and officers (D&O) lines, where a single underlying event causes multiple claims, potentially threatening solvency. The coronavirus creates clash risk for casualty insurers both within and across lines of insurance, Praedicat said.
Praedicat has applied previous mass litigation precedents to anticipate how COVID-19 liability could develop. The new clash scenarios include loss estimates allocated to companies that might be named in litigation and also to the insurance line that would cover the loss. This allows insurers to estimate exposure in their own portfolios, Praedicat said.
The scenarios complement Praedicat’s COVID-19 litigation tracker, letting insurers anticipate the ultimate effect of novel pandemic litigation emerging in the US courts.
Praedicat developed the solution within the Lloyd’s Lab, an insurtech incubator based in Lloyd’s of London, working with mentors from Argo, Hiscox, StarStone and Lloyd’s. It participated in the fifth cohort of insurtechs at the Lloyd’s Lab.
Robert Reville, chief executive officer at Praedicat, said: “The liability risk relating to COVID-19 is front of mind in the global insurance and reinsurance market right now.”
Emma Watkins, head of exposure management for Lloyd’s, who worked with Praedicat as a mentor, said: “For the insurance industry to maintain its critical role in facilitating recovery from catastrophes it is vital that emerging and clash risks are fully understood by the market and the insured.”
Praedicat has also created a multi-line scenario analysis feature in its software, CoMetaâ, to facilitate business decision-making.
Lauren Restell, Praedicat’s liaison to the Lloyd’s Lab and vice president of rating and regulatory affairs, said: “By utilising these new cross-line clash scenarios and model capability, clients are able to estimate potential exposure and develop underwriting strategies.”
They can also use the analysis to create innovative products to mitigate future risk, she said.
Praedicat, Emma Watkins, Robert Reville, Lloyd’s Lab