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Credit risk modelling

Summary of the impact

Research of Professor Brigo in the areas of credit risk, pricing models for the valuation of counterparty risk, and the development of accurate calibration methods of various credit risk models has generated significant impact both on public policy and on practitioners and professional services. His models were implemented and his calibration methods adopted in the financial industry. The significance attached to his work by the industry also resulted in a collaboration with the German regulator (BAFIN). Further evidence of his impact can be found in the fact that a Court of Law based its analysis in a financial intermediation case on Brigo's research.

Submitting Institution

King's College London

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Econometrics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

Improved pricing of European natural catastrophe insurance by statistical modelling of storm clustering

Summary of the impact

Statistical modelling of storms by Professor David Stephenson and co-workers in the mathematics institute at the U. of Exeter, has improved the understanding and thereby the pricing of insurance risk due to European windstorms and tropical cyclones. Temporal clustering in these catastrophic natural hazards has been quantified using novel process-based statistical models, which have then been implemented by industry to improve insurance pricing, e.g. on the integrated financial platform used by Willis actuaries to provide a more reliable view of risk as required by EU solvency 2 regulation. This research has also raised awareness in the industry about storm clustering, and has stimulated significant improvements in the main vendor catastrophe models, which are the main tools used by insurance companies to price European windstorm insurance.

Submitting Institution

University of Exeter

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Environmental

Research Subject Area(s)

Mathematical Sciences: Statistics
Earth Sciences: Atmospheric Sciences, Oceanography

Statistical models of mortality impact on the pricing and reserving of pensions

Summary of the impact

Research carried out from 2003 by Currie (Maxwell Institute) and his PhD students Djeundje, Kirkby and Richards (also Longevitas), and international collaborators Eilers and Durban, created new, flexible smoothing and forecasting methods. These methods are now widely used by insurance and pension providers to forecast mortality when determining pricing and reserving strategy for pensions. The methods were incorporated by the SME Longevitas in its forecasting package Projections Toolkit launched in 2009. This generated impact in the form of £400K turnover for Longevitas in licensing and consultancy fees, with further impact on the pricing and reserving strategies on Longevitas's customers. Since 2010 the methods have been adopted by the Office for National Statistics (ONS) to make the forecasts required to underpin public policy in pensions, social care and health and by The Continuous Mortality Investigation (CMI) to model and provide forecasts on mortality to the pensions and insurance industries. As a result, the research has changed practices in these advisory agencies and in the insurance industry.

Submitting Institutions

University of Edinburgh,Heriot-Watt University

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Econometrics

Valuing complex insurance liabilities using least squares Monte Carlo

Summary of the impact

Research by Cathcart, McNeil (both Maxwell Institute) and Morrison (Barrie & Hibbert) during the period 2008-2012 has developed a methodology based on least squares Monte Carlo to value complex insurance liabilities and manage their risks. This methodology has been adopted by Barrie & Hibbert (B&H, part of Moody's Analytics) and has enabled the company to develop an internationally leading proposition for valuing insurance products. This has generated £2.5M in revenue since 2011, through implementation in 5 new products and use in 12 new consulting projects.

Submitting Institutions

University of Edinburgh,Heriot-Watt University

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Econometrics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

Influencing Occupational Pensions Policy - The Pension Protection Policy

Summary of the impact

Neuberger, together with David McCarthy (Imperial), who, in their earlier work, had raised concerns about the sustainability of the Pensions Protection Fund (PPF), were commissioned by the Fund to conduct research on alternative levy structures. This led to the development of a new risk-based levy structure, which was implemented over the years 2012-2013. This research and its resulting impact have not only shaped how the PPF operates in ensuring the levy's burden is fairly shared, but has also benefited all UK holders of occupation based pensions and the taxpayer at large.

Submitting Institution

University of Warwick

Unit of Assessment

Business and Management Studies

Summary Impact Type

Economic

Research Subject Area(s)

Economics: Applied Economics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

The introduction of the Life Market, a global capital market for transferring longevity risk

Summary of the impact

The Life Market is a major new global capital market for transferring longevity risk from corporate pension plans and annuity providers to long-term capital market investors, such as sovereign wealth funds and endowments, in exchange for a longevity risk premium (paid to the investors by the institutions laying off their longevity risk). Previously, the only source of longevity risk hedging was the insurance industry which, given that so many people are living much longer than anticipated, now has insufficient capacity to deal with this risk (estimated at $25trillion) on a global basis. The size of their future pension liabilities now present serious threats to the solvency of many companies. The longevity bonds and swaps designed by Professor David Blake at the Pensions Institute at Cass Business School, City University London, were integral to the creation and operation of the Life Market. The adoption of these bonds and swaps by investors has served to establish a global capital market investor base contributing towards the long-term availability of longevity solutions, benefiting the insurance and pensions industries, employers and, in turn, employees through greater security of their pensions in retirement.

Submitting Institution

City University, London

Unit of Assessment

Business and Management Studies

Summary Impact Type

Economic

Research Subject Area(s)

Medical and Health Sciences: Public Health and Health Services
Economics: Applied Economics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

Epidemiological models to inform policy for control of emerging plant disease

Summary of the impact

Since 2004, researchers in Cambridge have developed a series of generic and flexible models to predict the spread of plant diseases in agricultural, horticultural and natural environments. These now underpin policy decisions relating to the management and control of a number of such diseases, including sudden oak death and ash dieback in the UK (by Defra and the Forestry Commission), and sudden oak death in the US (by the United States Department of Agriculture). This has subsequently had an impact on how practitioners manage these diseases in the field, and on the environment through the implementation of disease mitigation strategies. In the case of ash dieback, the Cambridge work has also directly contributed to public involvement in mapping the spread of the disease.

Submitting Institution

University of Cambridge

Unit of Assessment

Biological Sciences

Summary Impact Type

Environmental

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Applied Economics

Safety on the Sea

Summary of the impact

The safe operation of ships is a high priority task in order to protect the ship, the personnel, the cargo and the wider environment. Research undertaken by Professor Alexander Korobkin in the School of Mathematics at UEA has led to a methodology for the rational and reliable assessment of the structural integrity and thus safety of ships and their cargos in severe sea conditions. Central to this impact is a set of mathematical models, the conditions of their use, and the links between them, which were designed to improve the quality of shipping and enhance the safety of ships. The models, together with the methodology of their use, are utilised by the ship certification industry bringing benefits through recognised quality assurance systems and certification.

Submitting Institution

University of East Anglia

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Technological

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Numerical and Computational Mathematics, Statistics

African swine fever risk reduction as an exemplar of cogent policy advice

Summary of the impact

RVC's Veterinary Epidemiology, Economics and Public Health team (VEEPH) has been at the forefront of applying and evaluating new techniques for modelling disease risk, for policy and decision makers to use in surveillance and control of animal and zoonotic infections. Application of their recommendations, including European `Commission Decision' legislation, is contributing to ensuring that Europe remains free from African swine fever (ASF). The status of FAO Reference Centre in Veterinary Epidemiology, awarded by the United Nations' Food and Agriculture Organisation in 2012, recognises the RVC as a centre of excellence in this field and reinforces its role in guiding policies relating to animal health.

Submitting Institution

Royal Veterinary College

Unit of Assessment

Agriculture, Veterinary and Food Science

Summary Impact Type

Technological

Research Subject Area(s)

Economics: Applied Economics

Methods for Comparing Clinical Outcomes across Institutions

Summary of the impact

This case study concerns the research of Professor David Spiegelhalter on `funnel plot' methodology for comparing institutions. This system has now become the standard method within the National Health Service for comparing clinical outcomes, including hospital Trusts with apparently `outlying' mortality rates. In particular, mortality following children's heart surgery is analysed and presented using funnel plots, and Professor Spiegelhalter's work has been instrumental in handling high-profile cases such as surgery at Oxford Radcliffe Infirmary and Leeds General Infirmary.

Submitting Institution

University of Cambridge

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Political

Research Subject Area(s)

Mathematical Sciences: Statistics
Medical and Health Sciences: Public Health and Health Services
Economics: Applied Economics

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