‘Next asbestos’ in plain sight
Carriers writing commercial casualty business should be wary of hidden risks and unmodelled exposures which have the potential to be the “next asbestos”, Robert Reville, CEO of Praedicat, has warned.
Praedicat has identified 71 candidates or suspects within 250 chemicals with the potential to be the “next asbestos”, said Reville. Between these candidates, which include food, additives, industrial chemicals, herbicides, and even sugar, litigation worth some $86 billion could be waiting in the pipeline, he said.
“We can talk about specific losses or specific risk; if you look to quantify these exposures and identify where they are, there’s no reason you can’t get cover for them, and then charge for them and diversify,” said Reville.
He cited the $100 billion casualty insurance loss from asbestos which he believes has, long term, been very useful to the industry. However, he noted, the response of increasing the number of exclusions and restrictions in coverage has also widened the protection gap in casualty over the past few decades.
Ever since, the industry has feared what might be the next asbestos.
“Total size of the litigation was estimated at around $200 billion,” said Reville. “As the litigation played out, the industry was faced with the question: what could be the next asbestos?”
Science at the time foreshadowed the asbestos crisis, he claimed—but the industry did not respond. It should not make the same mistake with these 71 emerging risks, he said. Scientific studies could help cover new risk.
Praedicat has been acquiring scientific information from peer-reviewed papers to generate simulated litigation episodes it can then deliver to insurers to help them manage the risk.
“We start with data, using machine learning, natural language processing and AI, and produce the hypotheses of commercial activities, products or chemicals that may cause bodily injury,” Reville said.
However, the science around them is not always correlated. He explained that sometimes one scientific study may find evidence against another hypothesis.
Overall, Praedicat estimates some $86 billion in claims could be generated by litigation in response to these exposures. In addition, Reville said, there is a further $75 billion in uncovered potential claims. He suggested this provides a huge opportunity to close the protection gap in liability.
“All the technology to identify, track, quantify and build new reinsurance products for emerging risk is going to create some confidence that the industry is on it.
“We are therefore starting to address these issues, and also cover the lost ground from the last 30 to 40 years from the protection gap and grow significantly in casualty,” Reville said.
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