A new collaboration between re/insurance broker Aon and Praedicat, a liability emerging risk analytics company, looks to address reinsurance coverage gaps arising from emerging risks through the development of “named peril” products for insurers.
The partnership will result in the development of a range of specialist liability reinsurance solutions that address product liability exposures, including nano-materials and 5G.
The creation of “named peril” products will help insurers transfer emerging liability risks to both reinsurers and the capital markets.
According to Aon, the collaboration aims to address reinsurance coverage gaps and also to encourage the establishment of a robust casualty catastrophe market that could offer new and diversified exposures to the reinsurance sector and the insurance-linked securities (ILS) space.
The partnership will target the general liability and D&O market for current year and historical policy year exposure, to provide customers with bespoke products.
Chief Executive Officer (CEO) of Aon’s Reinsurance Solutions, Andy Marcell, said: “Innovation has always been a key part of our business, and we continually look to deliver new products to solve the market’s needs. Our collaboration with Praedicat is a step in building an innovative robust liability catastrophe market, which will eventually match what already exists on the property side.”
Praedicat’s CEO, Bob Reville, commented: “We are delighted to work with Aon to increase the size of the casualty insurance market by encouraging sustainable solutions to emerging risk. For us, Aon’s commitment to closing coverage gaps and solving clients’ problems with innovative solutions made them the ideal partner.”
As noted by Aon, reinsurance solutions for large-scale emerging liability exposures have often been seen as too costly by buyers, while reinsurers tend to view the exposure as too broad and concentrated.
However, by tailoring the coverage to a defined list of emerging risks on a named peril basis, it’s expected that the solutions will provide greater transparency which is needed to facilitate greater coverage certainty at risk-appropriate prices.
Praedicat’s analytics will provide the modelling which will inform both the product structuring and underwriting.
Casualty business is subject to significant exposure to emerging risk, which Aon highlights a key difference compared to the property catastrophe business, as well as accumulation risk that spans over multiple policy years.
It’s expected that Praedicat’s model will help assess the likelihood and severity of a casualty event, with the granularity needed for insurance carriers to take action.
Jessica Schuler, Senior Vice President, Praedicat, said: “The model has the functionality to allocate future losses to historical policy years and project when claims may arise. This flexibility will allow Aon to carve up the exposure along the time dimension to meet reinsurers’ appetite. In addition, the solutions will be designed to support the reinsurance transaction lifecycle from identifying the risk to underwriting, understanding accumulations, transferring the peril and reserving and managing claims.”
Amanda Nguyen, Senior Managing Director in Aon’s Reinsurance Solutions, commented: “This collaboration is another step for Aon to support and provide our clients with innovative solutions, during a time where increased litigation activity has shed light on growing casualty accumulation exposure and uncertainty.
“Aon is committed to supporting our clients’ ever-evolving needs and we look forward to working collaboratively with the market to design products of value and help meet clients’ strategic goals.”
