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Know your correlation: An interactive game

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Year of publication: 2024

Access: Open

Link: https://zenodo.org/records/12532855, https://doi.org/10.5281/zenodo.12532855

Organisation(s) / Author(s): John Hillier, Loughborough Univeristy, UK

Description:

Summary of activity: A dice-rolling game, simulating 6 causes of loss (i.e. possible hazards) and how dependency affects the chance of loss exceeding a threshold.

Why is the training important: In short, because diversification is the basis of all (re)insurance, and correlation (a.k.a. dependency) destroys diversification. So, it’s fundamental. If we get dependency wrong, we mis-estimate risk, mis-price risk etc ….

Technical considerations:

None

Keywords:

Insurance, Risk correlation, Natural hazard Dependency, Co-occurring hazards, Compound risk