We are delighted to announce that Nekomodel X - Praedicat's next generation liability catastrophe modeling solution - is now available in CoMeta!
- Hundreds of modeled risks and thousands of modeled companies
- Social inflation dynamics and ongoing litigation events fully embedded
- Explicit correlations across related litigation events
With this release CoMeta users can now access Praedicat's next generation liability catastrophe modeling solution, Nekomodel X, in the Exposure Management feature. This major model update greatly expands the number of modeled Litagion agents and named companies, employs a reengineered case strength and litigation activation model, explicitly incorporates known facts regarding ongoing litigation events, and is calibrated to reflect the impact of litigation funding on social inflation.
Litagion agent and company inventories
Nekomodel X models 246 distinct Litagion agents in all phases of the emerging risk lifecycle from emerging interest (e.g., isoxaflutole), to emerging damage (e.g., phthalates), to emerging litigation (e.g., per- and polyfluoroalkyl substances). This number represents a significant increase over the number of modeled hazards available in previous model versions (71). A small number of previously modeled Litagion agents (sugar, dietary salt, triclosan, and toxic mold) have been temporarily deprecated. These Litagion agents will return to the model over the coming months following additional modeling work.
We have also greatly expanded the inventory of named companies available for portfolio analysis from 39,297 to 127,605 corporate entities. The expanded inventory covers all U.S.-domiciled companies with worldwide revenue of at least $40 million along with their corporate tree ancestors, regardless of where those ancestors are domiciled. The expanded inventory also includes a set of companies (and their corporate tree ancestors) domiciled in Japan and Europe selected because they operate in industries that could have material exposure to U.S. liability. This additional set of companies is restricted to those with worldwide revenue of at least $100M.
As in previous model releases, Nekomodel X supports industry-based (NAICS and SIC) modeling for portfolio companies not available in the current inventory.
Case strength and litigation activation
At the core of Nekomodel X is the concept of case strength: an index of the strength of a plaintiff's case against named defendants. Case strength, in turn, depends on the strength of the scientific evidence supporting a plaintiff's allegations of injury and their ability to pin their specific injury on the particular actions of defendant companies. The case strength model is conceptually similar to that employed in previous model versions, but has been reengineered to allow for a simple decomposition into its constituent parts and to facilitate more frequent updating.
A key innovation in Nekomodel X is correlated litigation activation across related Litagion agents. As in previous model versions, the stochastic evolution of case strength and "materiality" (a measure of the potential payoff to the plaintiff of initiating litigation) governs the initiation of litigation events. But now, the model allows for the strong likelihood that litigation will emerge simultaneously over groups of related Litagion agents such as phthalates, bisphenols, and per- and polyfluoroalkyl substances; the model specifies 14 correlated Litagion agent groups in total.
Praedicat launched CoMeta's Litigation Tracking feature in June 2020 that allows users to monitor the evolution of litigation events relevant to general liability. Nekomodel X now directly incorporates that data in forecasting the future course of ongoing litigation events such as per- and polyfluoroalkyl substances, paraquat, and cell phones. In total, Nekomodel X employs data on 27 emerging litigation events to estimate historical case loads, which then, along with case strength, inform forecasts of how those caseloads could evolve going forward.
There has been a notable increase in the pace at which new mass litigation events initiate in the United States. This aspect of social inflation is driven by an influx of third-party litigation funding that has made unprecedented levels of capital available to the U.S. plaintiffs' bar. More capital allows the plaintiffs' bar to invest in higher risk-higher reward litigation events where the science is perhaps less supportive of plaintiffs' allegations, but the possibility facts damaging to the defense could emerge in discovery is compelling. Nekomodel X now considers the possibility that discovery will undermine the ability of the defense to counter plaintiffs' presentation of scientific evidence making litigation events in which a "one-sided" view of science strongly supports plaintiffs' allegations (despite convincing counter evidence) relatively more likely to initiate. Nekomodel X has also adjusted the influence of "materiality" in the model to make high-reward litigation events more likely to initiate (all else equal) than in previous model versions.
Probabilistic loss recalculation
As of this release, any newly uploaded portfolio will be run against Nekomodel X. In addition, all previously uploaded portfolios will be automatically run against the new model. This process is expected to take several days to complete. During this period, users may see in Portfolio Upload that a previously uploaded portfolio is in the "calculating" stage and, therefore, unavailable for viewing in Exposure Management. Once complete, however, Exposure Management will show Nekomodel X results for that portfolio calculated as of the original portfolio upload date. Scenario loss results are unchanged.
Users who want to retrieve previous model version results for a given portfolio can do so from CoMeta's Reports feature providing they have previously requested event loss table data for the portfolio. If previous model results are unavailable in Reports for a given portfolio of interest, please contact your account manager who can help you to recover them.
Company risk score updating
CoMeta's Underwriting feature employs Nekomodel results in company risk scores. These scores will be updated with Nekomodel X results over the coming weeks. In the meantime, company risk scores will reflect results based upon the previous model version that may not match account-level results available in Exposure Management.