Lloyd’s Lab and risk modelling firm Praedicat have developed a series of scenarios for the casualty insurance market in the face of the COVID-19 pandemic.
The scenarios are designed to help insurers that have a clash risk from COVID-19 that impact general liability and directors & officers (D&O) lines within an insurer’s portfolio.
Praedicat has so far been working with mentors from Argo, Hiscox, StarStone and Lloyd’s of London.
Clash refers to the circumstance where a single underlying event causes multiple claims which can threaten the solvency of insurers. The coronavirus creates clash risk for casualty insurers both within and across lines of insurance.
Praedicat has applied previous mass litigation precedents to anticipate how COVID-19 liability could develop.
These 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, allowing insurers to estimate exposure in their own portfolios.
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 participated in the fifth cohort of insurtechs at the Lloyd’s Lab, and were part of a fast-tracked COVID-19-themed group set up to develop technology that would support the Lloyd’s market against future waves of the coronavirus or other pandemics.
Adam Mitchell, Head of Group Exposure Management for Argo said: “The collaborative spirit in the lab is perfect for idea generation. As we strive to improve our understanding of liability accumulation risk it has been an education to work with the team.”
Robert Reville, Chief Executive Officer, Praedicat said: “This is a hugely exciting development for Praedicat and for the market. The liability risk relating to COVID-19 is front of mind in the global insurance and reinsurance market right now. We are proud to have had the support of the Lloyd’s Lab to develop these capabilities for the industry.”
Emma Watkins, Head of Exposure Management for Lloyd’s 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. We appreciate Praedicat’s efforts to help the industry with this novel emerging risk.”
Lauren Restell, Praedicat’s liaison to the Lloyd’s Lab and Vice President of Rating and Regulatory added: “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 create new innovative products to mitigate future risk.”