TALLAHASSEE — In the aftermath of the Parkland, Florida school shooting, insurance companies are now turning to new and more sophisticated predictive modeling to try to determine the level of risk involved with major casualty events, occurring more often in an increasingly unpredictable world. At the same time, changes made by the Florida legislature to improve campus safety might make schools more vulnerable to lawsuits from injured parties.
Traditionally, insurance companies providing liability policies to schools, hotels, and other venues cover more ordinary events. But recent mass shootings and bombings present liabilities never fully contemplated – nor the risk adequately priced. Now there’s a new tool to help the insurance industry better calculate previously difficult and unmanageable risks. It’s called scenario-based casualty risk modeling. It ultimately helps the insurance policyholders such as schools, restaurants, concert halls, and arenas by ensuring they have adequate commercial liability coverage for these events.
“We first try to understand the event, then ask – and determine – how much loss is likely to be an insured loss in that (an insurance or reinsurance company’s) portfolio,” said Robin Wilkinson, Vice President and Managing Director of Casualty Analytics at AIR Worldwide, appearing on The Florida Insurance Roundup podcast this week. “You’re reducing the problem from saying ‘Wow, how big could this event be?’ to ‘How much of that loss is likely to be in my (a reinsurer’s) portfolio?’”
Scenario-based casualty risk modeling can be used to calculate the commercial liability losses from extreme events, such as mass shootings, and in a variety of venues. Such recent events include the Parkland school shooting, the MGM Grand Hotel Las Vegas massacre, the 2016 Bastille Day attacks in France, and the 2013 Boston Marathon bombings. Most scenarios impact more than one insurance line.
AIR Worldwide is modeling both “sudden trigger” and “systemic” events. Florida has seen a lot of both over the years. Sudden trigger events are those that happen at one time and in one place, such as the Parkland school shooting, the recent Florida International University pedestrian bridge collapse, and the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010. Systemic events, while arising out of a single trigger, occur over time and involve more parties. The contaminated Chinese drywall issue in Florida in the 1990’s, asbestos contamination, opioid abuse, and even the Bernie Madoff financial swindle are all examples.
In the aftermath of the February Parkland school shooting, the Florida legislature passed the “Marjory Stoneman Douglas High School Public Safety Act” to improve campus safety through best practices. Wilkinson said the law could impact liability in future similar situations, by setting a new bar for school performance. Failure to comply with new standards might make schools more vulnerable to lawsuits.
”So instead of focusing on the shooter or perpetrator (the seeming trend now is) to look at how those events are being managed and how those venues are being managed. This trend could result in liability insurers paying-out for losses that might be insured or uninsured losses…and where the insurers haven’t really contemplated or quantified their potential exposure,” Wilkinson explained to podcast host Lisa Miller.
Miller, a former deputy Florida insurance commissioner, said casualty modeling holds great promise and could be the game-changer that risk modeling has been on the property insurance side. It’s credited with better assessing floodwater risk in Florida.
“Better data enables better prediction and ultimate outcomes. Enhanced modeling is improving the way insurance companies rate risk. More accurate pricing of risk benefits insurance interests and consumers. It’s also providing opportunities for new markets of enhanced insurance products,” said Miller.
You can listen to The Florida Insurance Roundup podcast here (www.TheFloridaInsuranceRoundup.com). The webpage contains additional Show Notes and other information. The podcast running time is 16:21.
The Florida Insurance Roundup from Lisa Miller & Associates, brings you the latest developments in Property & Casualty, Healthcare, Workers’ Compensation, and Surplus Lines insurance from around the Sunshine State.