Emerging liability risks: Designing liability scenarios

Despite continuous progress in modelling capabilities for property exposure to natural catastrophes, liability exposure management and scenarios for liability losses have remained opaque and difficult to conceptualise, let alone model. This is because liabilities often stem from a complex and dynamic interaction of legal and socioeconomic factors which can make this kind of problem hard to represent and the exposures hard to capture in a form that lends itself to systematic study.

Lloyd’s is investigating different methods that aim to reduce uncertainty in this area, and this report presents an approach developed by Arium which seeks to harness the power of supply chains to understand and quantify liability events.

Topics covered:
• Why are scenarios important for liability accumulations?
• What distinguishes liability catastrophes from natural catastrophes?
• Designing scenarios.
• Financial and non-financial case studies.
• Stochastic modelling.