in the course of underwriting.
people are mobile. Thus, determining building occupancy rates at the exact time of the event can be challenging. Two large California earthquakes, Northridge and Loma Prieta, occurred outside business hours, resulting in very
small insurable damages for workers’
outcome could have drastically changed.
in every US state. An injury claim for a worker in one state can be orders
CHANGE IS CONSTANT the industry is constantly releasing new alternatives to better understand and price this type of risk.
Changes in regulation, increased competition and data gained from large scale loss events are all driving this sector forward, as Fullam explains.
“Increases in modelling needs generally come from one of three areas:
“With ORSA set to be a required part of the regulatory sphere in much
of the global insurance community, there will be an increased emphasis interactions to companies.
add to the overall understanding of the event.
Delving deeper into the challenges of modelling casualty risk, Larsen
says that within what is already a complex line to model, there are some risks which are even more complex again.
“Some casualty coverages are inherently complicated, and thus hard to model. For example, general liability covers not only claims from property damage, but also bodily injury, personal injury, products and operations liability, and advertising injury.
“There are many possible triggers of coverage, and all must be
Workers’ compensation is probably the most commonly modelled casualty line today, as earthquakes and terrorist attacks can be mass-casualty events. But even modelling workers’ compensation carries several challenges.
One of these is accounting for the fact that many important drivers of
“Increased need will be placed on the insurers to build mass tort models.
requirement will almost certainly guarantee that modelling in this area
Larsen at EQECAT adds: “The evolution of modelling has included typical contract terms and conditions. 9/11 was a major event for this industry, which led to a greater understanding and more focused approach on exposure data.
“We got greater clarity on the exposure, and what the insurer could actually lose. It also helped insurers to think more about the contracts. For example, where the employees are and how concentrated they are.
“Since 9/11, risk schedules for workers’ compensation insurance include
located and employment shift information that provides greater insights
FUTURE STEPS While the industry appears to have kept pace with demand within the casualty sector in terms of products and capacity, improved modelling
Spring 2015 | INTELLIGENT INSURER | 23
SHUTTERSTOCK / FXQUADRO
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