Lloyd’s report details emerging liability risk

by IBO 19 Oct 2015

Lloyd’s report details emerging liability risk

The latest Lloyd’s emerging risk report has been released as the global player takes an in-depth look at accumulations of liability risk and how big data analytics can be used to help manage the threat.

The report looks at the difficulties in predicting accumulated liability risk and “the potential to send shockwaves through the insurance industry,” that claims in the space can have.

Trevor Maynard, head of exposure management at Lloyd’s, said that the advancement of big data and technology could be the best way to understand, not only accumulated liability risk, but emerging risks in general.

“Rapid advancements in big data have opened up a wealth of new opportunities in the understanding of emerging risks,” Maynard said.

“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, Inc., 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.”

Chris Mackinnon, Lloyd’s general representative in Australia, told Insurance Business that the drawn out impacts of liability catastrophes such as asbestos-related claims meant any techniques that could help with modelling which could help foresee and prevent such shocks repeating in the future would be welcomed, and not just by insurers.

“Within the insurance industry, it is not just insurers themselves who are set to benefit from the insights and techniques opened up by the rise of big data: brokers have also begun to pay attention to the potential of these new developments,” he said.
 
“Brokers who win business are those who are able to understand bespoke risks, and the ability to connect a risk with the best possible insurer is a valuable skill.
 
“Improvements in big data, if applied correctly, have the potential to enhance this matchmaking ability by adding greater depth to brokers’ understanding of risks and of prospective insurers, and in doing so can drive stronger customer relationships and more balanced books.”
 
Mackinnon noted that both the local and global insurance industry will benefit from an increased use of big data and technology as emerging risks are more difficult to measure and understand using traditional approaches.
 
“Global emerging risk areas such as cyber, the sharing economy and supply chain risks are far less measurable using traditional measures due to the potential for global aggregation of risk, and it is therefore essential that, as an industry, we try to develop new modelling capabilities to help understand these new emerging risks better. 
 
Mackinnon noted that, currently, the use of big data analysis is cornered by the largest players in the market but he believes that it is only a matter of time before the practice trickles down throughout the industry.
 
“In the Australian insurance industry, big data analytics is currently the domain of the major insurers and the global brokers and reinsurance brokers. The skill sets and resources required to effectively capture, manage and use big data are not widely available to the general insurance community as yet.
 
“This specific area of expertise is one that will undoubtedly continue to grow, both within the industry, and through the growth of the external ‘disrupters’ who already have highly developed data analytics, and who are likely to adapt those skills to emerging risk and insurance.”

To view the full report, click here.