New agreement will inform the use of mathematical modelling for insurance, to help mitigate natural catastrophe risk
WTW has announced a new collaboration between its WTW Research Network and the London Mathematical Laboratory to better inform decision-making through catastrophe models. The lead academic partner for the research, Professor Erica Thompson, is a global leader in the application of mathematical models to support real-world decisions.
Professor Thompson is known for her research* into understanding how models are created and used, focused on establishing criteria to strengthen their effectiveness. The London Mathematical Laboratory is partnering with WTW to apply this innovative research and insights to natural catastrophe models, which are used extensively in the insurance sector. This collaboration is especially crucial in a market environment where the reliance on models for quantifying climate-related risks is intensifying. Her expertise will be instrumental in helping WTW’s clients better understand the catastrophe models they are using for decision-making in a dynamic risk landscape.
Professor Thompson has a unique focus on the technical, commercial and regulatory pressures behind model creation. While WTW’s competitors explore model outcomes, examining the decisions made during model development and calibration is less common. This novel perspective can provide insights into the often, opaque process of how models that influence business strategies are created and evaluated.
Cameron Rye, Head of Modelling Research and Innovation, WTW Research Network, said “Catastrophe models have been used by insurers for 30 years to inform insurance pricing and risk management. When there is a gap between what models tell us and what we observe in the real-world, it often prompts criticism of the models. But if we focus on how models are built and evaluated, could this lead to better decision-making? Professor Thompson’s research will help catastrophe and climate modelers at WTW better understand the strengths and limits of our modeling tools, and ultimately allow us to give better advice to our clients”.
Professor Erica Thompson, said “Model evaluation is a key task both for model-builders and for model users, and the bottom line for model evaluation is not whether it happens to do well on arbitrary performance metrics but whether it actually helps to inform better decisions. I’m excited about working with WTW to look at how to understand the quality and usefulness of models used for insurance decision-making and how to ensure that we get the most out of these advanced tools.“