Lux Actuaries is excited to announce our participation in the 5th Insurance Data Science Conference, taking place on 15-16 June 2023 at Bayes Business School, City University of London. The conference brings together academics and practitioners in areas including data science, analytics, machine learning, artificial intelligence, computational statistics and software, as applied in the insurance industry. 

We are proud to present our War Risk Model at the conference, developed in-house by our data science team. The model has been designed to assess the degree of risk of conflict for each country in the near future, while highlighting the objectively measurable indicators that can be linked to the emergence of conflicts that have already occurred and may affect the development of conflict in the future.

Lux War Risk Model

Civil war and organised violence continue to erupt throughout the world into the 21st century, with thousands of victims annually. In addition to the direct damage inflicted, such conflicts also have a negative impact on the socio-economic environment, including but not limited to, economic growth, willingness to do business and demographics. Armed conflict appears to be more likely in some countries than in others, and we use a data-driven approach to understand this likelihood and its main drivers. Retrospectively, for each conflict, the root cause or a complex of such causes can be assessed. It therefore can be useful to create early warning predictors for armed conflicts and potentially use them to understand what drives conflicts and wars. Such early warning indicators could potentially play a key role in P&C ratemaking, especially in the Marine, Construction and Property lines of business.

The Model is based on a multi-layer perceptron: A Supervised feed-forward neural network with multiple layers which is trained to predict whether the country is in the conflict status or not, based on several input features sourced from reliable platforms such as the World Bank, International Labour Organisation, UN Population Program, and the REIGN (Rulers, Elections and Irregular Governance) Database among others.

The key production output from the Model is a world map where countries are ranked in accordance with the risk profile assessed by the model based on the likelihood of the conflict in each month in the next 3 years (up to the end of 2024):

• Low Risk: Likelihood of conflict does not exceed 25%
• Low to Moderate Risk: Likelihood of conflict is between 25% and 50%
• Moderate to High Risk: Likelihood of conflict is between 50% and 75%
• High Risk: Likelihood of conflict exceeds 75%.

The model assigns the likelihood of each country being in a state of conflict which allows explicit ranking across countries.

For more information on the conference please visit www.insurancedatascience.org

You can download the conference programme and abstract booklet here.