Broker Aon has entered into a collaboration with analytics specialist Praedicat to develop a range of specialist liability reinsurance solutions that address product liability risks, including nanomaterials and 5G.
Aon and Praedicat will develop “named peril” products for insurers, helping them to transfer emerging liability risks to reinsurers and the capital markets.
The collaboration aims to address reinsurance coverage gaps arising from emerging risks, and to encourage the development of a robust casualty catastrophe market that could offer new and diversified exposures to the reinsurance and insurance-linked securities sectors.
The collaboration 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, (above) 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, Praedicat, said: “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 cedants, while reinsurers may view there to be overly broad exposure.
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, the broker added, noting that Praedicat’s analytics will provide the modelling to inform the product structuring and underwriting.
Aon added that 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.
As such, it said, Praedicat’s model will help assess the likelihood and severity of a casualty event, with the granularity needed for insurers to take action.
Jessica Schuler, senior vice president, Praedicat, said: “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, added: “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.”
More information is available at https://www.aon.com/reinsurance/specialty_practices/insurtech.jsp.