Praedicat helps clients navigate risk exposures with new scenario analysis platform

Praedicat, the liability emerging risk analytics company, has launched a new risk scenario analysis platform, designed to simplify the job of producing fully compliant reports liability scenarios for syndicates at Lloyd’s of London.

Praedicat’s new risk scenario analysis platform allows clients to access a range of emerging risk liability clash scenarios, including COVID-19 liability; PFAS (per- and polyfluoroalkyl substances) drinking water contamination litigation; building product litigation; mobile phones; next generation opioids; and other ‘next asbestos’ scenarios.

In 2021 UK regulators require firms to implement forward-looking risk management frameworks for man-made risk. Praedicat’s new scenario platform addresses this requirement, as well as the six new liability scenarios required by Lloyd’s, which include: financial product mis-selling (UK); financial market manipulation (US); pharmaceutical product (US); construction product global; chemicals in food (US); and offshore/onshore energy (US).

These scenarios were developed in response to increasing regulatory focus on how insurance companies are managing their exposure to man-made risks. Lloyd’s will collect syndicates’ responses to the liability scenarios in two periods in 2021.

Clients can upload their casualty book into the platform to understand how their casualty business is exposed to these emerging risk scenarios. Clients provide basic portfolio information, such as company name, insurance type, attachment point, trigger, limit, share, and defense cost assumptions. This is then run against the entire scenario suite, and the Lloyd’s damage factors where appropriate.

The platform also offers functionality to modify assumptions in the software to stress test portfolios against social inflation risk.

Robert Reville, Praedicat’s chief executive officer, promised new scenarios will be launched on the platform throughout 2021, including a set of climate liability scenarios. “With social inflation driving a surge in mass litigation in the US, it is more important than ever to monitor aggregations of latent casualty risk,” he added.

Lauren Restell, director of rating and regulatory affairs at Praedicat, said the risk scenario analysis platform helps syndicates choose appropriate scenarios to report to Lloyd’s, based upon the book that the syndicate writes.

“Our bottom-up approach goes further to identify company and industry scenario risk drivers, delivering actionable insights to decision makers while simultaneously meeting all of Lloyd’s reporting requirements,” she added.

Kirsten Mitchell-Wallace, head of portfolio risk management at Lloyd’s of London, said: “Understanding casualty risk to enable effective exposure management is a priority focus area for Lloyd’s in 2021 and beyond. It is great to see new tools being developed to build an emerging risk framework to dynamically identify, monitor and manage future casualty accumulations.”

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