For the first time in a long time, the catastrophic potential of latent liability exposures is in the news. As the glyphosate, talc, and opioid litigation continues to unfold and grab headlines, you may naturally be asking “How bad could it get?” and “How is my portfolio exposed?” In addition to getting answers to these questions, you may want to conduct stress tests of your portfolio across a range of outcomes involving latent liability exposures and demonstrate to rating agencies, regulators, and investors that you understand and are managing your latent liability accumulations appropriately.
Praedicat’s library of 69 realistic (RDS) and extreme disaster scenarios (XDS) provides a comprehensive framework to describe exposure to modellable and un-modellable scenarios. Praedicat’s realistic disaster scenarios (RDS) describe catastrophic mass litigation events that we consider unlikely but minimally probable and consistent with current science and law, or in other words, within Praedicat’s event set. Extreme disaster scenarios (XDS) describe hypothetical liability catastrophes that lie outside of Praedicat’s estimated probabilistic model or the event set. These scenarios explore the magnitude and distribution of losses across a range of conceivable disasters that would require extreme shifts in science or law.
In Praedicat’s software products, CoMeta and Oortfolio, you can access this diverse library of scenarios to better understand casualty catastrophe risk and inform portfolio stress testing and portfolio risk management. Praedicat’s scenarios can be used to quantify exposure to emerging risks that are not currently implicated in litigation but have the potential to drive litigation in the future. They can also be used as an additional resource for quantifying latent liability losses for both internal and external reporting requirements.
Our scenarios can be used to answer these questions and more:
- What losses can I expect to hit my book of business if mass litigation involving a particular chemical or class of chemicals, e.g. phthalates or per- and polyfluoroalkyl substances, were to take off?
- What RDS’s are most relevant to my book of business? What do my projected losses under this scenario look like in comparison to economy–wide losses?
- If litigation were to be successful around glyphosate and Non-Hodgkin lymphoma, what might my insured’s losses look like in this scenario?
- What is my portfolio’s exposure to emerging risks that are not fully modeled and quantified, like nanotechnology?
- How might my exposure to a certain RDS/XDS change over time as my portfolio evolves? How can I track this for internal/external reporting?