Emerging Risks and Changes in Contemporary Assurance

Objective

This course introduces the main challenges today faced by the insurance sector in the context of modern risks and technological evolutions. We will discuss how the so-called « emerging risks » (climate risk, pandemic, cyber…) weaken the key mechanisms behind insurance, like mutualization for instance, but also how actuarial methodologies can adapt to this new deal, for example via the use of machine learning or bayesian approaches.

Planning

) Introduction : general principles of insurance
            - inverted cycle of production
            - mutualization
            - adverse selection and moral hazard
            - introduction to regulation and its impacts on modeling
            - pricing, reserving, risk transfer

2) Data and risk evaluation
            - statistical methods and pricingméthodes statistiques et calcul de tarif
            - type of available data
            - data quality

3) Machine learning and insurance
            - simplified case studies

            - examples in pricing, reserving…
            - operational limits and interpretability

4) Emerging risks

            - Climate risk: modeling and applications        

            - Pandemic: modeling and applications

            - Cyber risk: modeling and applications

5) Bayesian methods
            - Bayesian credibility

            - Prior computing

References

Conseil Économique, Social et Environnemental (2022), Climat, cyber, pandémie : le modèle assurantiel mis au défi des risques systémiques, https://www.lecese.fr/sites/default/files/pdf/Avis/2022/2022_07_risques_emergents_systeme_assurantiel.pdf

Direction Générale du Trésor (2022), Le développement de l’assurance cyber, septembre, https://www.tresor.economie.gouv.fr/Articles/00367730-14c0-4303-95af-eeb6442fb19b/files/8a344142- fcd5-4d21-a3d7-abb0a404087f.

Marceau, E., & Dodge, Y. (2013). Modélisation et évaluation quantitative des risques en actuariat: Modèles sur une période. Paris: Springer.

Lloyds (2018), Pandemic, potential insurance impacts, https://assets.lloyds.com/media/3066455e-3231-46a7- 9dea-e5c62bfaaf2d/pdf-pandemic-potential-insurance-impacts-er-pandemic-insuranceImpacts-v2.pdf.

Lopez, O. (2023), Insurability of large emerging risks, Debate Paper AEFR, https://www.aefr.eu/fr/debate-paper/6154/insurability-of-large-emerging-risks-january-2023

National Association of Insurance Commissioners (2020), Report on the Cybersecurity Insurance Market, https://www.insurancejournal.com/app/uploads/2021/11/NAIC-Cyber_Insurance-Report-2020.pdf.