A message from Michael Steel and Colin Holmes

Our mission at Moody’s is to help the insurance industry see risk differently and deliver advanced risk analytics solutions so that firms can thrive in this increasingly interconnected and complex risk landscape. Many lines of business are rapidly adopting advanced risk analytics, and we are continually looking for opportunities to broaden the availability of Moody's insurance solutions.

We are demonstrating our commitment to investing in casualty risk assessment with a major announcement today. To help deliver advanced risk analytics for casualty insurers, we are both delighted to announce the acquisition of Praedicat, Inc.  

Our range of advanced analytics solutions combines the latest risk and market insight with the best science, granular-level exposure data, sophisticated financial modeling, and more to produce actionable insights. 

Then, using highly resilient and scalable technology platforms, these insights are delivered to business users and decision-makers, via tailored applications to support processes including risk selection and pricing, portfolio and exposure management, asset-liability management, and financial reporting.  

This advanced analytics approach of combining risk modeling based on the latest analyses, a real-world view of exposure, and delivering actionable risk insights, are all principles that we see shared by Praedicat. 

By integrating their exceptional capabilities with our extensive data, analytics, and technological resources, we are poised to set new standards in casualty underwriting.

Praedicat: Casualty risk pioneers

We’d imagine Praedicat is a familiar name for many of you in the P&C industry, and this acquisition feels like coming full circle, as in 2012, Moody’s RMS was one of the original founding investors. Dr. Robert (Bob) Reville and his team based in Culver City, California, are pioneers in casualty risk analytics. They help casualty insurers, brokers, and reinsurers assess a myriad of potential perils that could generate significant liability and subsequent insured losses. 

It was interesting to look back at the 2012 launch announcement, with Praedicat “…looking to use new approaches to extend a field of analytics called catastrophe risk modeling, and to develop ‘liability catastrophe models.’ Liability catastrophes are catastrophes with a human cause for which businesses or people may be held liable, such as asbestos or climate change.”

What is an example of a ‘liability catastrophe’? Where property insurers use major hurricanes and earthquakes as examples, liability insurers use examples such as the asbestos crisis that rose to prominence in the late 1980s and early 1990s, as the long-term, devastating health impacts of this commonplace material came to the fore.  

In the U.S. alone, it was estimated that 27 million people had been exposed to asbestos in the workplace, and 100 million were exposed to asbestos products in buildings. AM Best estimated in 2017 that asbestos litigation and losses, as well as environmental losses for the U.S., totaled US$146 billion, of which insurers had funded US$130 billion. 

A driving force in setting up Praedicat was to help casualty insurers benefit from the same risk analytics rigor that property and life insurers were becoming used to. Stung with significant losses from claims such as asbestos, Praedicat’s mission was to ‘…better manage man-made catastrophes, and help clients to avoid them.’  

Praedicat has developed risk management solutions to help insurers understand a potential client’s exposure to what they define as Litagion® agents, specifically identified exposures that could produce future liability claims. Some of these agents subsequently generated rising claim levels, such as products containing PFAS (per- and polyfluoroalkyl substances), or mass tort claims for products ranging from glyphosate and talc. It also helps manufacturers and solution providers to build products and services that minimize future liabilities, learning lessons from past mistakes and scanning the horizon for emerging threats.

As environmental concerns continue to climb up the agenda for countries at different stages of industrialization, past- and present pollution liabilities loom, and with climate change seeing rising severe heat levels, for example, insurers need to examine climate liability scenarios that contemplate a range of climate-induced litigation events that could trigger general liability, directors and officers (D&O), and workers’ compensation policies. 

Climate liability is creating significant dislocation for casualty firms, as the risk of climate liability, combined with social inflation factors, and the rise of litigation finance, all generate uncertainty. The acquisition of Praedicat represents the commitment of Moody's Insurance to deliver solutions for these pressing issues facing the industry, as modeling and risk assessment solutions deliver greater predictability and profitability to insurers. 

Shared vision

We are excited to welcome the Praedicat team to Moody’s, and to continue our shared vision, one shared by our clients, that the future of insurance lies in a more rigorous, data-driven approach. 

We believe this acquisition is an excellent fit for our expansion in the casualty insurance market, building on our strong foundations in areas such as workers' compensation - where we help clients assess their exposure to perils from terrorism to earthquake – and complementing our organic development plans, in areas such as D&O. This strategic move accelerates our growth and continues to demonstrate to clients our investment and dedication to leading with data-driven insights and science-based risk evaluation.

Bob Reville and his team at Praedicat share our excitement and collective vision of the future of casualty insurance and Bob sees that all signs increasingly point to transformation in casualty analytics in coming years. As with other lines of business, he says casualty firms have increasingly embraced data and analytics in underwriting.  

But in the next chapters of the story, Bob envisages the emergence of a ‘casualty cat’ market, with increased capital markets involvement in casualty risk. Beginning with the acquisition of Praedicat, Moody's will play an increasingly critical role in facilitating these exciting growth and risk management opportunities for the industry.  

Of course, clients of Praedicat can continue to expect the high-quality service they have always relied on, which will now be further enhanced by the comprehensive resources and capabilities of Moody’s.

Our commitment to leading with data-driven insights has never been stronger. This acquisition bolsters our ability to deliver comprehensive, nuanced risk solutions that meet the evolving needs of the casualty market. 

We believe this partnership is not just a step forward for Moody’s or Praedicat, but for the entire industry, promising a future where risk is understood and managed with unprecedented clarity and precision.  

We are both looking forward to discussing this exciting development at the Rendez-Vous de Septembre in Monte Carlo next week. For more information about our casualty insurance solutions, click here.