Volkswagen’s industrial-scale emissions fraud could have been better assessed using state-of-the-art scenario modelling, according to a leading risk management company.
[EUPRwire, Sat Oct 10 2015] Volkswagen’s industrial-scale emissions fraud could have been better assessed using state-of-the-art scenario modelling, according to a leading risk management company.
UK-based Russell Group, which provides software and services to the global insurance industry, says the use of cheating software in VW’s diesel cars to deceive emissions regulators is a classic case of an ‘unexpected’ event - one that shrewd risk analysis should have foreseen.
Russell Group deploys its proprietary analytics to the world’s major underwriters, giving them multiple event scenarios to help accurate risk assessments and pricing across the specialty insurance classes, including product liability. The company is expanding its operations across Asia.
Managing Director Suki Basi says even the most unlikely conspiracy, such as the ‘defeat devices’ embedded in 11 million Volkswagen and 2.1 million Audi cars worldwide, can be factored in to risk modelling.
‘It is far from inconceivable that emissions control-manipulating software in engines would be used on an industrial scale to hoodwink investigators,’ says Basi. ‘The commercial consequences of non-compliance with vehicle emissions regulations certainly gave an incentive to cheat and ‘game the system’ in VW’s favour.’
Core to Russell Group’s unique ALPS risk management modelling software, which also embraces aviation and casualty, marine hull and liability, energy, space and speciality property classes, is the simulation of an ‘event set’ that can then be used for pricing and other risk management analysis.
The same event set could be used to inform reserving, business planning, forecasting, and to produce accurate underwriting risk distributions for capital modelling.
Such a simulated event set based on past losses and current exposure permits a greater range of loss scenarios to be explored than does a purely historical analysis.
Credit Suisse estimates that the cost to VW in terms of recalls and fines could reach $87 billion, more financially damaging than the Deepwater Horizon oil spill was to BP. Volkswagen’s financial services arm has also been hit by the scandal, having to pay more to borrow money to loan to its customers, says Credit Suisse.
*Russell Group is taking part in the Singapore International Reinsurance Conference, Nov 2-4 2015.
Russell Group is a leading risk management software and services company fast expanding its operations across Asia. Through its ALPS suite of products, Russell Group provides a truly integrated framework for insurance and reinsurance clients operating across the specialty classes.
With an underwriting risk framework that delivers a complete understanding of underwriting exposure, Russell Group helps clients generate clearer risk insights and assessments, robust capital utilisation and improved portfolio return on equity.
As a pioneering UK-based data analytics company, Russell Group offers insurers and reinsurers across Asia proprietary technology that factors in the realistic, probabilistic and unexpected for better scenario modelling to give more accurate pricing in underwriting risk management.
If you would like to learn more about Russell Group’s ALPS solutions, please contact firstname.lastname@example.org