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Stochastic modelling of liability accumulation risk

17 Apr 2017

Liability exposure

This report, published by Lloyd’s in collaboration with Arium, sets out a new data-driven methodology that for the first time allows (re)insurers to model liability exposure probabilistically across their entire portfolios.

Report cover

Stochastic modelling of liability accumulation risk

This innovative approach categorises casualty events based on a company’s business activities - its products and services, operations and infrastructure. This allows insurers to map the economic relationships as products and services move through the economy. This helps (re)insurers model liability risk systematically, regardless of risk classification, similar to the way in which they model catastrophe exposure. 

This has not been possible previously and represents a big step forward in better understanding liability risk exposure.