While insurers’ use of models to analyze and quantify risk is well established in the property space, it’s becoming increasingly important in the casualty space. The use of models in this area has grown significantly in the past five years, as companies recognize the looming specter of large, unforeseen losses that may threaten insurers’ balance sheets and future earnings.
The framework that Gesick defines can be used to classify both systemic and emerging risks.
In Part 2 of this two-part article, Gesick will demonstrate how this framework described here in Part 1 can be used to classify different types of emerging risks.
Part 1 of 2
Executive Summary Offering analogies to property-catastrophe modeling, Verisk SVP and Actuary Eric Gesick explains the basics of developing a framework for liability-catastrophe modeling. In the liability world, perils can be corporate activities, product flaws or operational losses instead of storms and earthquakes, and more specific named perils can include defective auto parts or contaminated foods rather than Atlantic hurricanes or West Coast wildfires.
The framework that Gesick defines can be used to classify both systemic and emerging risks.
In Part 2 of this two-part article, Gesick will demonstrate how this framework described here in Part 1 can be used to classify different types of emerging risks.
Part 1 of 2
“Liability catastrophes”—large-scale events triggered by a common underlying cause that can affect multiple organizations and corporations, industries, coverages and policy years—can ripple through global supply and distribution chains and result in widespread liability losses across multiple divisions within insurance companies and across insurers.