16 October 2015 Insurance

Lloyd’s unveils method of assessing accumulations of liability risk

Lloyd’s has presented an innovative approach to managing accumulations of liability risk, a challenge the market claims has the potential to send shockwaves through the insurance industry.

A new report, developed by liability catastrophe modelling company Praedicat in collaboration with Lloyd’s, sets out a new methodology which uses big data to improve insurers’ understanding of liability risk.

New technology is used 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.

According to Lloyd’s, the report also shows the potential of big data innovations 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,” said Lloyd’s.

Trevor Maynard, head of exposure management at Lloyd’s, added: “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, 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.”

Robert Reville, Praedicat chief executive officer, 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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