In the aftermath of the school shooting in Parkland, Fla., insurance companies are exploring more sophisticated predictive modeling methods to try to determine the level of risk involved in major casualty events.
Insurers providing liability coverage to hotels, schools and other public venues have traditionally covered more ordinary events, according to a report by business development and consulting firm Lisa Miller & Associates. But recent mass shootings – and other events like the recent string of bombings in Austin, Texas – bring with them liabilities that haven’t been fully contemplated, Lisa Miller & Associates said in a recent news release. In order to help better calculate previously unmanageable risks, the industry is increasingly turning to a method called scenario-based casualty risk modeling. According to the release, this method helps policyholders like schools, restaurants and arenas ensure they have adequate commercial liability coverage.
“We first try to understand the event, then ask – and determine – how much loss is likely to be an insured loss in that (insurance company’s) portfolio,” Robin Wilkinson, vice president and managing director of casualty analytics at AIR Worldwide, said on a recent episode of The Florida Insurance Roundup podcast. “You’re reducing the problem from saying, ‘Wow, how big could this event be?’ to ‘How much of that loss is likely to be in (a reinsurer’s) portfolio?’”
Scenario-based casualty risk modeling can be used to calculate commercial liability losses from high-casualty events like the Parkland shooting, the MGM Grand Hotel Las Vegas massacre and the 2013 Boston Marathon bombing, the release said.
“Better data enables better prediction and ultimate outcomes,” said Lisa Miller, CEO of Lisa Miller & Associates. “Enhanced modeling is improving the way insurance companies rate risk. More accurate pricing of risk benefits insurance interests and consumers. It’s also providing opportunities for new markets of enhanced insurance products.”