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Amlin and Oxford University announce launch of Systemic Risk of Modelling White Paper

Amlin and Oxford University announce launch of Systemic Risk of Modelling White Paper

03 Nov 2015

White paper forms key milestone in three year research project

Amlin plc, the specialist international insurer and the Future of Humanity Institute at Oxford University’s Oxford Martin School (OMS), are pleased to announce the launch of a White Paper, reaching a key milestone in a three year research project into the Systemic Risk of Modelling (SRoM).

The White Paper, entitled ‘Systemic Risk of Modelling in Insurance: Did your model tell you all models are wrong?’ has been produced and co-authored by the SRoM Working Party, a collaboration forum composed of voluntary contributions from 30 academic researchers and industry practitioners, including (re)insurers, catastrophe model vendors, brokers, regulators and consultants.

The White Paper is further evidence of the momentum gathering behind the concept of systemic risk in modelling and the scale of the working party represents a growing industry voice seeking guidance on better regulatory, organisational and behavioural management practices in (re)insurance.

The focus of the White Paper is on finding a practical solution for the industry to SRoM, drawing on the findings to date from the Amlin-OMS collaborative research to introduce a Risk Scorecard framework. The scorecard is designed to help firms and regulators measure the amount of systemic risk introduced from modelling, with the intention in the long-term of it becoming part of a toolkit to better monitor and manage risk.

Systemic risk is increasingly relevant due to the growing level of globalisation, interconnectedness, and speed of business transactions in the world. Amlin and OMS have been working together on the project since the start of 2014, with the aim of researching and promoting a better understanding of SRoM across the (re)insurance industry, to the benefit of clients and stakeholders.

Simon Beale, Chief Underwriting Officer Amlin plc, said: “One of the most profound changes our industry has experienced in the last two decades is the increasing influence of quantitative models, now used for many purposes from catastrophe risk to technical pricing to capital adequacy. Whilst the benefits of modelling are undeniable, systemic risk resulting from unintended side-effects of modelling is becoming increasingly common and in itself, complex, and could create the potential for systemic risk in (re)insurance.

“Developing the framework for the risk scorecard is another significant step in managing the risks we face and ensuring that our reliance on modelling within the industry is managed more effectively. We are extremely grateful to all members of the working group who have helped share ideas for this paper.”

Ian Goldin, Director of the Oxford Martin School at the University of Oxford, said: "This unique project has brought leading academics together with leading thinkers in insurance to identify and overcome a number of critical shortcomings in the modelling of risk. I am delighted that the results of this innovative collaboration will now be widely available through the publication of a landmark White Paper which aims to improve long-term systemic risk governance in insurance and other institutions, where risk models are used."

To download a copy of the white paper click here


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