Aon, Praedicat target reinsurance coverage gaps in casualty market

Re/insurance broker Aon has collaborated with risk analytics insurtech Praedicat as it looks to address reinsurance coverage gaps arising from emerging risks through the development of “named peril” products for insurers.

The partnership will see the two companies develop a range of specialist liability reinsurance solutions that address product liability risks including nanomaterials and 5G.

Aon said the creation of “named peril” products for insurers will help them transfer emerging liability risks to reinsurers and the capital markets.

The collaboration also aims to advance the development of a "robust casualty catastrophe market" that could offer new and diversified exposures to the reinsurance and insurance-linked securities sectors.

The partnership will target the general liability and directors’ & officers’ (D&O) market for both current year and historical policy year exposure, to provide clients with tailored solutions.

Andy Marcell, CEO of Aon’s Reinsurance Solutions, 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.”

Bob Reville, CEO of Praedicat, added: “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.”

According to Aon, reinsurance products to address large-scale emerging liability risks, such as casualty clash, have often been seen as too expensive by cedents, while reinsurers tend to view the exposure as overly broad. However, by tailoring the coverage to a defined list of emerging risks on a named peril basis, the products are expected to provide the transparency needed to facilitate greater coverage certainty at risk-appropriate prices. Praedicat’s analytics will provide the modeling to inform the product structuring and underwriting.

Casualty business is subject to significant exposure to emerging risk – a key difference compared to the property catastrophe business – as well as accumulation risk that spans over multiple policy years. Praedicat’s model is expected to help assess the likelihood and severity of a casualty event, with the granularity needed for insurers to take action.

Jessica Schuler, senior vice president of Praedicat, explained: “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, concluded: “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.”

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.