New Lloyd’s report could help reduce dangerous liability risk accumulation

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The FINANCIAL — A new report, commissioned by Lloyd’s, presents an innovative approach to managing this type of risk, and uses big data analytics to improve understanding and reduce the potential for unexpected market shocks.

Accumulations of liability risk have the potential to send shockwaves through the insurance industry, and are one of the most complex exposure management challenges faced by insurers. A new report, commissioned by Lloyd’s, presents an innovative approach to managing this type of risk, and uses big data analytics to improve understanding and reduce the potential for unexpected market shocks.

Developed by liability catastrophe modelling company Praedicat Inc in collaboration with Lloyd’s, this report sets out a new methodology, which uses big data to improve insurers’ understanding of liability risk. Using new technology to search and mine data from scientific research associated with potential liability risks, this approach estimates the probability of a general consensus being reached that exposure to a substance or product causes a particular form of injury.

This report also shows that big data innovations have the potential to create more robust liability risk management for insurers. Further developments in liability catastrophe modelling using big data could offer insurers a means of managing liability accumulations while also identifying opportunities to increase exposure to certain risks where the accumulation is consistent with their risk appetite

Speaking about the report, Trevor Maynard, Head of Exposure Management at Lloyd’s, said:

“Rapid advancements in big data have opened up a wealth of new opportunities in the understanding of emerging risks. One area in particular in which this is creating new possibilities is around the management of liability risk. The approach explored in this report, developed by Praedicat, Inc., is one example of how new technologies are being used to enhance our understanding in this area. While the most effective risk transfer is expected to continue to rely on a combination of underwriting expertise and detailed analysis, emerging technologies are offering new insights that we hope will drive further innovation in the insurance industry.”

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Praedicat CEO, Robert Reville, said:

“Actuaries were the original data scientists applying innovative statistical methods to price and spread risks.  Today, new technologies and ‘big data’ are bringing a new wave of statistical innovation to liability insurance, promising a more robust market and a greater ability to help their clients manage the most complex risks.”

 

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