Propelling growth in the casualty insurance market: Moody’s and Praedicat join forces

On September 5, 2024, Moody’s acquired casualty insurance modeller and analytics provider Praedicat. The global risk assessment company said the deal would build out its casualty and liability modelling capabilities and enhance its overall integrated risk assessment strategy. 

In Monte Carlo this week Mike Steel, general manager of Moody’s Insurance Solutions, and Bob Reville, chief executive and co-founder of Praedicat, spoke to Monte Carlo Today to share their insights on how the acquisition will enhance capabilities in casualty insurance and reshape the industry’s approach to risk management. 

Steel said he was excited about the integration of Praedicat into Moody’s Insurance Solutions, highlighting the company’s commitment to providing comprehensive data and analytics across various segments of the insurance industry.  

“If you think about Moody’s, our analytics business has provided data and analytics capabilities that are essential for banks, asset managers, governments, and corporates. However, our penetration in the casualty space had been limited,” he explained. 

Moody’s previously acquired RMS in 2021 to strengthen its capabilities in property-catastrophe modelling. Steel remarked: “RMS has strong credentials in property-cat, but we identified a significant opportunity to enhance our offerings in the casualty domain.” 

The eyes of the leadership are now set on expanding casualty modelling, leveraging the vast datasets and analytics capabilities that Moody’s possesses. Steel emphasised the potential for improved casualty underwriting capabilities, especially in areas such as directors’ and officers’ insurance. 

“This connection establishes a foundation for a seamless partnership.” Bob Reville

“We’re exploring how to utilise our firmographic data—our extensive database of 550 million companies—to inform casualty underwriting decisions,” he stated. This data can include comprehensive financials, environmental, social and corporate governance scores, and litigation risk assessments, enhancing the quality and reliability of underwriting. 

Reville echoed Steel’s sentiments about the strategic fit between Moody’s and Praedicat. He said that after the acquisition, with Moody’s bringing in comprehensive company information, Praedicat has the tools to significantly expand its evaluation of risk at the company level, which is crucial in the casualty insurance space. 

Reville stressed the historical ties between the two, saying: “RMS was among our initial investors, and two of our four co-founders came from RMS, so RMS has always been part of our DNA. This connection establishes a foundation for a seamless partnership.”  

Strength in partnership

The pair stressed to Monte Carlo Today that the shared vision for advancing casualty analytics is timely and necessary, given the rise of litigation finance, mass litigation and regulatory pressures within the domain. 

“Mass litigation is becoming increasingly prevalent,” Reville said, referencing the growth of lawsuits concerning issues such as climate change and water contamination. “What were once considered rare events, such as the ‘forever’ chemicals (PFAS) and Roundup litigation, are now occurring with alarming frequency. Insurers need enhanced strategies to manage these evolving risks.” 

As a result, the insurance industry is currently facing a multitude of challenges that necessitate advanced analytics and modelling. Steel articulated the urgency, saying: “The increase in mass litigation is driving insurers to seek innovative solutions. They want to be ahead of the curve and are looking for a partner who can provide actionable insights.” 

“Moody’s goal is to broaden its capabilities within the insurance sector.” Mike Steel

Highlighting the interconnected nature of today’s risks, Steel said that as an underwriter, “you always want to be scanning the horizon. What risks are bubbling up that you should be concerned about?”. This proactive approach is where Praedicat can significantly enhance Moody’s capabilities. 

Steel outlined how historical events such as the COVID-19 pandemic have shown the complexity of interconnected risks. “Courts were shut down during the pandemic, causing a backlog of cases that interplays with inflationary effects on settlements,” he noted. “Understanding these connections will help insurers better navigate the intricate landscape of casualty risk.” 

As Moody’s and Praedicat combine their strengths, the potential for transformative growth is clear. Steel warned that the market is at an inflection point as it faces these interconnected risks. Moody’s goal is to broaden its capabilities within the insurance sector, particularly for casualty, bringing deeper insights and analytics into the market.  

Addressing this landscape of interconnected risks—such as climate risk and litigation—will require a collaborative approach across industries, Steel stated. 

“We aim to understand these risks holistically and develop solutions that are effective and scalable,” he said. He cited Moody’s existing success in climate modelling as an example of how integrating data across sectors can enhance understanding and risk management. 

Reville reiterated the significance of the partnership, emphasising that the collaboration aims to deliver practical solutions for the insurance industry and its clients. By merging Moody’s capabilities with Praedicat’s expertise, the two can create a common framework, making it easier for stakeholders across the industry to engage and manage risks, he concluded. 

Bob Reville is chief executive and co-founder of Praedicat. He can be contacted at: reville@praedicat.com 

Mike Steel is general manager of Moody’s Insurance Solutions. He can be contacted at: michael.steel@moodys.com