Amlin and Oxford University launch major research project into the Systemic Risk of Modelling
The use of models by the insurance industry has contributed to a greater understanding of risk and more efficient use of capital. However, as the use of models becomes ever more prevalent, there is greater scope for systemic risk within individual companies and across the (re)insurance market. To promote a better understanding of this complex field, Amlin has commissioned the Future of Humanity Institute (FHI) at Oxford University’s Oxford Martin School to research the Systemic Risk of Modelling.
The initial findings of the research project will be released today at a conference in Oxford, which will include speakers from among some of the leading thinkers in the field of systemic risk. A unique feature of the research project will be to try to evaluate the role of human behaviour such as cognitive bias in the use of models, together with other approaches to complex systems such as network theory, alongside more conventional assessments of modelling. A particular focus of the project will be catastrophe modelling. The FHI enjoys a unique multidisciplinary position at the Oxford Martin School, as it brings together the best minds in a wide variety of fields such as mathematics, philosophy and science.
Nick Bostrom, Director of the Future of Humanity Institute, University of Oxford, said: “Over the past few years, systemic risk has grown into a major topic of interest for a variety of fields. Financial collapses and the increasing interconnectedness of key institutions suggest that the study of systemic risk warrants serious consideration. Some risks have extremely high stakes, so failure to understand and characterise these phenomena could be catastrophic. The Future of Humanity Institute is pleased to partner with Amlin in this shared effort to understand such risks.”
Commenting on the three-year programme, Simon Beale, Group Chief Underwriting Officer at Amlin, said: “We believe that the idea of ‘systemic risk of modelling’ resonates with many people in our industry, and like any systemic issue, it is complex and addressing it will require strong collaboration across the industry and academia. Amlin is not just funding the research but also taking an active role, with insurance practitioners testing academic ideas. We hope that funding public research will help bring the best minds together, so that as an industry we find ways to manage and mitigate this risk for the benefit of our clients and stakeholders.”