New casualty risk modelling approach developed by Lloyd’s

15-03-2017

Lloyd’s has developed a new data-driven methodology that it claims lets re/insurers accurately model liability exposure probabilistically across their entire portfolios.

Developed in partnership with modelling company Arium the new approach categorises casualty events based on a company’s business activities, such as its products and services, operations and infrastructure. It then maps the economic relationships that reflect the journey of products and services through the economy.

According to Lloyd’s this creates liability “storm tracks”, which it says provides a new, structured way of analysing casualty events, regardless of risk classification. As a result Lloyd’s says that this allows insurers to model liability risk in more detail than they have previously, rather like the way they model catastrophe exposure.

This new approach is the result of a three-year joint project to improve insurers’ understanding of liability risk exposure by Lloyd’s and Arium.

“This is a tremendously exciting development,” said Jon Hancock, Lloyd’s performance management director. “It is in everybody’s interest to classify liability risks as accurately as possible, and this methodology represents a real step forward for the industry. Of course, for it to work effectively it is dependent on high-quality industry classification data, and I would encourage all brokers and other stakeholders to help with the collection of such data.”

Lloyd's, Arium, Casualty Risk, Technology, Insurance, Reinsurance, Jon Hancock, Trevor Maynard, Robin Wilkinson

Bermuda Re