This study examines the use of #artificialintelligence (#ai) and #bigdata data analytics by #insurers in #belgium for segmentation purposes to determine #claims#probability for prospective policyholders. The implementation of AI and big data analytics can benefit insurers by increasing the accuracy of #riskassessment. However, pervasive segmentation can have negative implications and potentially harm policyholders if their risk is incorrectly calculated. Existing restrictions in #insurance#regulations fall short of protecting policyholders from inaccuracies in risk assessments, potentially resulting in incorrect #premiums or conditions.
"We assess the ability of #GPT … to serve as a financial robo-advisor for the masses, by combining a financial literacy test and an advice-utilization task (the Judge-Advisor System). #davinci and #chatgpt (variants of GPT) score 58% and 67% on the #financialliteracy literacy test, respectively, compared to a baseline of 31%. However, people overestimated GPT's performance (79.3%), and in a savings dilemma, they relied heavily on advice from GPT (WOA = 0.65). Lower subjective financial knowledge increased advice-taking. We discuss the risk of overreliance on current large #languagemodels models and how their utility to laypeople may change."
"We consider two possible approaches to the problem of incorporating explicit general (i.e. economic) #inflation in the #non_life [#insurance] #claims reserve estimates and in corresponding reserve SCR, defined - as in #solvencyii - under the one year view. The #actuarial approach provides a simplified solution to the problem, obtained under the assumption of deterministic #interestrates and absence of inflation risk premia."
The study finds that entrepreneurs view #riskmanagement as a mindset focused on asset preservation, competitive advantages, and local talent development. Risk management practices in #smes are mainly informal yet deliberate and fully integrated into the organization's fabric. In-house #accountants help entrepreneurs with #erm, while external accountants do not systematically contribute to risk management. The study contributes to both the theory and practice of risk management by providing empirical insights into SME owners' perceptions, sense-making, and risk management practices.
"In the [#riskmanagement] context of #capitalallocation principles for (not necessarily coherent) #riskmeasures, we derive - under mild conditions - some representation results as ``collapse to the mean'' in a generalized sense. This approach is related to the well-known Gradient allocation and allows to extend a result of Kalkbrener (Theorem 4.3 in \cite{kalkbr05}) to a non-differentiable setting as well as to more general capital allocation rules and risk measures."
"... this paper argues that recent #eu#regulatory reform to #corporategovernance, as a means to improve #financialstability is a large-scale intellectual fallacy. Absent EU-wide structural reform to control #risktaking in large and complex #financialinstitutions, the stability of the EU #bankingsector will remain compromised. Smaller and less interconnected #banks will both improve bank corporate governance and create a safer and more stable #financialsector."
The latest #ai-#cybersecurity-#knowledgemanagement practices advance the future of #riskmanagement practices. The article highlights the importance of risk management and #cyberresilience in a dynamic world characterized by #uncertainty and complexity.
"#risksharing is one way to pool risks without the need for a #thirdparty. To ensure the attractiveness of such a system, the rule should be accepted and understood by all participants. A desirable risk-sharing rule should fulfill #actuarial fairness and #pareto optimality while being easy to compute. This paper establishes a one-to-one correspondence between an actuarially fair #paretooptimal (AFPO) risk-sharing rule and a fixed point of a specific function."
Academic research in #alternativedata has become increasingly popular recently, with more research needed to explore new investment strategies and theories in finance innovation and #businessmanagement. This #chinese Beijing Normal University (BNU) paper provides an overview of more than 100 papers published from 2015 to 2021 on the emerging applications of alternative data, categorizing the data types and their applications in #finance and business. It also analyzes the roles of alternative data in finance theory and business management, arguing that alternative data can act as a bridge leading to more efficient financial markets.
This paper proposes a #credit#portfolio approach for evaluating #systemicrisk and attributing it across #financialinstitutions. The proposed model can be estimated from high-frequency credit default swap (#cds) data and captures risks from publicly traded #banks, privately held institutions, and coöperative banks. The approach overcomes limitations of earlier studies by accounting for correlated losses between institutions and also offers a modeling extension to account for #fattails and #skewness of #assetreturns. The model is applied to a universe of banks in #europe, highlighting discrepancies between the #capitaldequacy of the largest contributors to systemic risk and less systemically important banks.