Valuation and advanced learning methods for emerging, global risks in actuarial science

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This research is comprised of two distinct, but related projects that will investigate new insurance pricing paradigms for emerging risks and the interplay between the valuation of insurance liabilities and the securitisation of emerging risks. KU Leuven is the home institution for one project and the University of Melbourne will host the second. The collaboration will ensure a successful completion of the research goals.

The details

Insurance companies bring security to society by offering protection against financial losses. By organizing and managing pools of risks they enable individuals and companies to transfer risk in exchange for a premium.

Insurers manage risks by diversifying over a large number of policies, perils and geographic regions. They operate in a highly data-driven business, where reliance on (advanced) learning methods for decision making is omnipresent.

Actuaries are involved in the technical valuation of risk (via pricing and capital management) and the design of risk transfers: from policyholder to insurer, from insurer to reinsurer and, more recently, to the financial markets (the so-called securitisation of risk).

This research focusses on two important dimensions of this process:

(1) the actuarial valuation of (insurable) risks in a changing risk landscape, and

(2) the design of new types of risk transfers to ensure a broader absorbing capacity and hence wider insurability of risk.

In the first dimension, we focus on new products driven by 21st century, emerging risks (e.g. cyber, climate), as well as existing products (e.g. motor, fire, health) and their call for customer-centricity with flexible, dynamic and tailor-made products, offered by fair and discrimination-free pricing and subscription plans.

In the second, we focus on the interplay of actuarial and financial valuation and the securitization of insurance risks resulting from (among others) longevity and climate change.

The key research questions in the KU Leuven-based project are:

  • To derive formulas for discrimination-free insurance pricing
  • To design predictive modelling tools for the actuarial valuation of emerging risks
  • To create data analytic tools for a customer-centric, usage-based insurance paradigm that bundles selected products and even services

The graduate researcher on this project is Lorenzo Marchi.

Supervision team

KU Leuven participants:
Professor Dr Katrien Antonio, Professor Dr Jan Dhaene

University of Melbourne participants:

Associate Professor Rui Zhou, Professor Benjamin Avanzi

The key research questions in the Melbourne-based project are:

  • To develop new valuation and risk management techniques for managing portfolios with systematic risks
  • To measure how effectively index-based securities can transfer risks specific to an insurer and to apply an effectiveness measure to the valuation of insurance liabilities
  • To investigate the integration of financial market-consistent valuation and classical actuarial pooling techniques
  • To develop a better and more appropriate risk management framework, making society more resilient to systematic insurance risks

The graduate researcher on this project is Atibhav Chaudhry

University of Melbourne participants:

Associate Professor Rui Zhou, Professor Benjamin Avanzi

KU Leuven participants:
Professor Dr Katrien Antonio, Professor Dr Jan Dhaene

Other joint PhD projects