Product Risk Management Research Articles

Motor Insurance Claim Frequency Prediction Using XGBoost

Insurance claim frequency modelling is an important task for non-life insurers, this together with other variables forms an important part of product pricing and risk management. The traditional frequency models such as Poisson, Negative Binomial and Zero Inflated models have several weakness such as scalibility issues, overdispersion and independence assumptions for large datasets and therefore not ideal to use when dealing with complex and unstructured data. Extreme gradient Boosting Algorithm (XGBoost) is an ensemble learning which has the capacity to effectively handle big complex and unstructured insurance data. XGBoost creates tree-based models by iteratively fitting decision trees to the residuals of the previous predictions, effectively reducing the error in each iteration. This research utilized and explored the XGBoost algorithm to process motor insurance claims large dataset in-order to predict the frequencies of insurance claims, that is 0,1,2,and 3. Using this algorithm we aim to enhance the accuracy of predictions that will yield better estimates for improved risk assessment and pricing of insurance products. Cross validation was performed to assess the true performance of our model. Cross validation results showed that XGBoost models for the claim frequency had a RMSE estimate of 0.949, MAE of 0.7741 and RSQ 0.781. This demonstrated a strong predictive performance, with an RMSE of 0.949 and an MAE of 0.7741, indicating a low average error in the predictions.The RSQ of 0.781 suggests further that the model explained a significant proportion of variability of the insurance data. Our model was evaluated with a confusion matrix. The results of the confusion matrix showed that for the frequency 0 99.59% of cases were correctly predicted, frequency 1 94.01% were correctly predicted and frequency 2 84.80% and finally frequency 3 only 40.96% of the observations were correctly predicted.These results highlights the potential of XGBoost as a robust modeling technique for handling big data and accurately predicting insurance claim frequency. The results corroborate with other studies that XGBoost is an invaluable tool for insurance companies.

AI-based R&D for frozen and thawed meat: Research progress and future prospects.

Frozen and thawed meat plays an important role in stabilizing the meat supply chain and extending the shelf life of meat. However, traditional methods of research and development (R&D) struggle to meet rising demands for quality, nutritional value, innovation, safety, production efficiency, and sustainability. Frozen and thawed meat faces specific challenges, including quality degradation during thawing. Artificial intelligence (AI) has emerged as a promising solution to tackle these challenges in R&D of frozen and thawed meat. AI's capabilities in perception, judgment, and execution demonstrate significant potential in problem-solving and task execution. This review outlines the architecture of applying AI technology to the R&D of frozen and thawed meat, aiming to make AI better implement and deliver solutions. In comparison to traditional R&D methods, the current research progress and promising application prospects of AI in this field are comprehensively summarized, focusing on its role in addressing key challenges such as rapid optimization of thawing process. AI has already demonstrated success in areas such as product development, production optimization, risk management, and quality control for frozen and thawed meat. In the future, AI-based R&D for frozen and thawed meat will also play an important role in promoting personalization, intelligent production, and sustainable development. However, challenges remain, including the need for high-quality data, complex implementation, volatile processes, and environmental considerations. To realize the full potential of AI that can be integrated into R&D of frozen and thawed meat, further research is needed to develop more robust and reliable AI solutions, such as general AI, explainable AI, and green AI.

Lesson from Crude Oil Treasure Failure in 2020

After the 2020 pandemic, the Chicago Mercantile Exchange (CME) changed its trading rules, allowing the negative oil price mechanism in the futures market. That same month, Bank of China's (BOC) "Crude Oil Bao" investment product brought huge losses to investors, exposing the product's risk management flaws. The purpose of this report is to conduct a comprehensive study of the factors that led to the losses suffered by Chinese investors in international crude oil product trading. It delves into the operational dynamics of these financial industry institutions, as well as the perspectives of Chinese banks and retail investors affected by the incident. Finally, recommendations are made to strengthen risk management measures in response to events such as the Crude Oil Treasure, with the aim of helping commercial banks to improve their product design methodologies. The article provides valuable insights into understanding financial product failures and offers guidance on mitigating risk.

Recent Trends in Life Insurance: Innovations, Challenges, and Implications

This research paper explores recent trends in the life insurance industry, focusing on innovations, challenges, and implications for insurers, consumers, and regulators. Drawing on a comprehensive review of literature, market analysis, and industry reports, the paper examines key trends shaping the landscape of life insurance in the digital age. It highlights the impact of technological advancements, changing consumer preferences, regulatory developments, and demographic shifts on product design, distribution channels, underwriting practices, and risk management strategies. The paper also discusses emerging opportunities and challenges for life insurers in addressing the evolving needs and expectations of customers, enhancing operational efficiency, and navigating regulatory complexities. Through a critical analysis of recent trends, the paper aims to provide insights into the future direction of the life insurance industry and inform stakeholders about potential strategies for sustainable growth and innovation.

The Influence of Product Diversification, Service Quality, and Risk Management of Islamic Banks on Money Market Stability in Indonesia

This study investigates the effect of Product Diversification, Risk Management, and Service Quality of Islamic banks on Money Market Stability in Indonesia. Using quantitative analysis based on Structural Equation Modeling with Partial Least Squares (SEM-PLS), data were collected through a survey of Islamic bank customers. The results reveal significant positive relationships between Product Diversification, Risk Management, Service Quality, and Money Market Stability. Product Diversification positively influences Service Quality and Risk Management, while Service Quality and Risk Management, in turn, positively impact Money Market Stability. The findings underscore the importance of adopting comprehensive strategies to enhance the stability of the money market in Indonesia's Islamic banking sector. These insights have implications for practitioners, policymakers, and researchers aiming to promote financial stability and inclusivity in Islamic finance.

Development of New Products for Climate Change Resilience in South Africa—The Catastrophe Resilience Bond Introduction

Climate change has brought several natural disasters to South Africa in the form of floods, heat waves, and droughts. Neighbouring countries are also experiencing tropical cyclones, almost on a yearly basis. The insurance sector is faced with an increased level of climate change risk with individuals, corporates, and even the government approaching it for financial cover. However, with an increased level of competition in the insurance sector, (re)insurers must engage in massive product research and development. Therefore, this paper looks at the possibility of the insurance industry developing new products in the form of catastrophe resilience bonds (CAT R Bonds). A qualitative approach is used following content analysis of (re)insurers’ product development policies, marketing documents, company reports, and risk management reports as well as the Conference of Parties 27 and 28 resolution papers. The findings reveal that (re)insurers’ underwriting capacity, reinsurance protection, and innovative and creative product development increase because of CAT R Bonds. CAT R Bonds enhance the interaction between the capital market and money market, thereby giving speculative investors another investment option. Increased investment into new product development such as CAT R Bonds must continue in South Africa in pursuit of climate change resilience goals.

Heterogeneous impact of crop diversification on farm net returns and risk exposure: Empirical evidence from Ghana

AbstractIncreasing frequency of extreme weather events threatens the livelihoods of low‐income farm households due to the heavy dependence on rain‐fed agriculture coupled with the under‐developed formal markets for risk management products. Thus, crop diversification is one of the widely used ex ante adaptation strategies to hedge against weather risk exposure. In this study, we use survey data from the northern Savanna zone of Ghana merged with historical weather data to shed light on the heterogeneous impact of crop diversification on farm net returns and risk exposure. We employ the dose response function and instrumental variable techniques to address potential endogeneity concerns. Overall, our findings show that crop diversification is a welfare‐enhancing strategy that significantly increases farm net returns, lowers the probability of crop failure, and thus decreases downside risk exposure. Notably, our dose‐response function analysis demonstrates that the positive benefits of crop diversification are particularly pronounced at lower intensities, reaching an optimal threshold. Beyond this point, the incremental advantages tend to diminish, suggesting the importance of carefully considering the optimal level of diversification for maximum benefits. The results further underscore the significant impact of both access to agricultural extension services and fertilizer usage on the adoption of crop diversification.

Financial Innovation and Risk Management in Japan

Purpose: The aim of the study was to investigate the Financial Innovation and Risk Management. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Japan has seen a surge in financial innovation driven by fintech startups and digitalization efforts by traditional banks. However, this innovation comes with regulatory challenges and risks that must be managed. Regulatory frameworks are being updated to address new risks like cybersecurity threats. There's also a growing focus on corporate governance, risk culture, and sustainability integration. Unique Contribution to Theory, Practice and Policy: Option pricing theory, capital asset pricing model (CAPM) & modern portfolio theory (MPT) may be used to anchor future studies on the financial innovation and risk management. Foster a culture of innovation within financial institutions by promoting collaboration between risk management professionals and product development teams. Establish regulatory sandboxes and innovation hubs to facilitate responsible experimentation with financial innovations while maintaining regulatory oversight.

Occurrence of heavy metals in sanitary napkins from seven countries: Implication for risk management of female hygiene products

Chemicals in sanitary napkins are easy to enter women's bodies, as these products are in contact with the skin of vagina and vulva directly, which has strong absorption capacity. However, available information regarding the occurrence of metals in sanitary napkins and their potential hazards, remains very limited. This study measured the concentrations of As, Co, Cu, Pb, Cd, Zn, Ni and Cr in sanitary napkins collected from seven countries. Moderate levels of Pb, Cd, Zn and Cr and lower levels of other metals were found, in comparison to the metal concentrations reported for other products previously. Metal concentrations differed by producer, price and fragrance. These metals were originated mainly from the introduction of raw materials and the use of chemical additives during the manufacturing process. Relative to other skin-contacted products, the sanitary napkin contributed more to women's total metal exposure, although the exposure was lower than that of dietary intake. The summed non-carcinogenic risks from six metals and the carcinogenic risks from Pb were acceptable. However, more research is required to investigate metals in sanitary napkins and the associated health risks to women, owing to the variability in the metal concentrations and the complexity of actual exposure.

Counseling on Cooperative Management as a Driving Force for Economic Empowerment at the Sukamiskin Islamic Boarding School Bandung

This Community Service aims to provide understanding to cooperative administrators and students at the Sukamiskin Islamic Boarding School regarding the benefits and effective management strategies of cooperatives. The method used in this research is interviews and direct observation of cooperative administrators and students involved in cooperative activities. The research results show that counseling about cooperative management is very important to increase the understanding and skills of cooperative administrators and students in managing cooperatives. In this outreach, information and training is provided regarding the basic principles of cooperative management, financial planning, risk management and marketing of cooperative products. With this outreach, it is hoped that cooperative management at the Sukamiskin Islamic Boarding School can become more effective and have a positive impact on community economic empowerment. Cooperative administrators and students will become more competent in managing cooperatives, so that they can generate better income for their members. Counseling on cooperative management as a driving force for economic empowerment at the Sukamiskin Islamic Boarding School, Bandung City is very important to increase the understanding and skills of cooperative administrators and students in managing cooperatives. It is hoped that this counseling can provide significant benefits in increasing the income and welfare of cooperative members.

J&L Railroad: The Board Meeting

This short case could be handed out at the end of class discussion on “J&L Railroad” [UVA-F-1053] in preparation for the following class, or if students are more experienced with hedging and option pricing, the instructor may choose to cover both cases in a single class period. It is the companion case to “J&L Railroad” [UVA-F-1053], and presents more technical issues regarding the hedging problem by requiring students to understand option-pricing principles. The board likes the CFO's hedging recommendations, but it wants a more careful analysis of the bank's prices for its risk-management products: the caps and floors. Besides demanding an understanding of option pricing, this case puts particular emphasis on the calculation and use of implied volatility.

Methodological Approaches to Risk Management of Advanced Therapy Medicinal Products

Introduction. Advanced therapy medicinal products (ATMPs) rely on recent advances in medical science, but alongside with potential benefits they may also bring safety concerns for patients. The inherent complexity of the ATMP production and use calls for special approaches to risk management throughout their lifecycle, from obtaining the raw materials to administration to the patient.Aim. The aim of the present study was to develop approaches to risk management for ATMPs, using the example of CAR T-cell therapy.Materials and methods. The study analysed the relevant regulatory frameworks currently in force in the European Union and the United States of America, namely the regulations and guidelines adopted by the Center for Biologics Evaluation and Research of the U.S. Food and Drug Administration and the Committee for Medicinal Products for Human Use of the European Medicines Agency.Results and discussion. The paper provides a classification of patient risks, which was developed based on the European risk-based approach. It formulates the principles of risk management for each of the risks, depending on the stage of the product life cycle. Each type of risk was considered separately. The following risk minimization strategies were determined: compliance with the good practices, ensuring the necessary qualifications or expertise of all parties involved in the product life cycle. The main element of risk control is the detailed description of the medicinal product use in the summary of product characteristics and patient information leaflet.Conclusion. The study identified the main stages at which ATMP risks may occur, and each type of risk was considered separately. The following requirements should be put in place in order to manage the ATMP risks: requirements for distributors on how to perform the product transportation and storage and to keep records for the marketing authorisation holder; requirements for healthcare facilities on how to perform the product storage, its preparation for use, advising and informing the patients on the treatment risks, symptoms of adverse events, preparatory and follow-up medical procedures, and on how to keep records for the marketing authorisation holder; requirements for the qualifications of healthcare professionals who are in charge of the product storage, its preparation for use, treatment procedures, advising and informing the patients on the treatment risks, symptoms of adverse events, and follow-up medical procedures. The data obtained will be used in the preparation of recommendations for ATMP developers.

VIABILITY OF EXTERNAL SHARIAH AUDIT PRACTICE:

The current trend in Shariah governance and assurance has now gone beyond internal Shariah audit to external Shariah audit (ESA). At the international level, the move towards enhancing Shariah governance in Islamic financial institutions (IFIs) were made by mandating ESA function by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) in its auditing standards in year 2019. Then, in year 2023 Islamic Financial Services Board (IFSB) jointly collaborate with AAOIFI on issuing an exposure draft on Shariah governance framework which suggested as best practice for ESA to be conducted not just for IFIs but also for Islamic capital market. As there is increasing number of institutions offering Shariah compliant products and services, there is also the need for ESA to provide assurance in sectors beyond IFIs. Besides big audit firms, the supply of ESA can be offered by small and medium audit practitioners (SMPs) as well. A focus group discussion was held to study this issue with 17 SMPs on the viability to venture into the Shariah audit industry. The findings indicate challenges to SMPs as there is no regulatory requirement for the conduct of ESA in Malaysia; there is debate on the audit scope and a need for human capital development to develop required skillset for external Shariah auditors that includes knowledge in Shariah principles, Shariah compliant contracts, Shariah risk management and Islamic capital market related products and services.

The missing link between project and product risk management: From the review to the call to action

The missing link between project and product risk management: From the review to the call to action

Valuing variable annuities with path-dependent surrender guarantees under regime-switching Lévy models

Variable annuities with complex surrender features are nowadays increasingly popular for managing longevity risks. The study of their accurate pricing and sensitivity analysis is one of the main actuarial research topics. This paper studies the valuation problem of variable annuity contracts with guaranteed minimum maturity benefits on a set of predetermined discrete tenor dates under regime-switching Lévy models. Extending from existing vanilla payoffs, we consider the guaranteed minimum maturity benefits with lookback and geometric average features. We customise the dynamic programming principle to solve the corresponding optimal stopping problem, relying on some semi-analytical valuation formulae resulting from an acute Fourier cosine series expansion. Finally, numerical illustrations are provided to show the accuracy and efficiency of the proposed method. We also demonstrate the use of our proposed method in a range of sensitivity analysis exercises, which shed light on the pricing and risk management of complex variable annuity products.

Causal Chains Linking Weather Hazards to Disasters in Somalia

Abstract Weather risk management products can be critical for supporting effective humanitarian actions to mitigate and prevent disasters; however, to be truly actionable, they must be based in an understanding of how weather contributes to disaster risk, informed by humanitarians’ decision-making context. Our paper seeks to identify considerations for weather risk management products to support disaster risk management, through analysis of humanitarian perceptions of the factors and processes that contribute to weather-influenced disasters, taking Somalia as a case study. We carry out semistructured interviews with humanitarian actors familiar with using weather information in their work, and we apply social cascades and disaster risk creation as conceptual tools in our analysis. Our study finds that humanitarian actors perceive historically influenced social networks, livelihood dependence on seasonality, terrorist territorial control, public capacities to manage disasters, and household-level factors related to asset control and coping mechanisms contribute to weather-influenced disasters in Somalia. These factors and processes are part of humanitarians’ dynamic decision-making context. Key insights from our study concern the importance of understanding local geographies of marginalization to design weather risk management products with the context specificity necessary for effective humanitarian actions. Also, assessing weather effects on livelihood calendars can help identify those seasonal weather conditions most responsible for detrimental livelihood impacts. Consideration of livelihood calendars can also promote accurate assessment of the effects of consecutive weather-related hazards on coping capacities and resiliency.

Risk Management in Drug-Device Combination Product Development

Breakthrough innovations in drug and biologic based therapies as well as technological developments in design and development of medical devices have led to the rapid rise in the use of combination products in the last few decades. The resulting maturity of combination products as a global market category has led to 3 key trends: expanding adoption of medical devices for drug delivery, increasing complexity, and growing awareness of product experience and risk. Adoption of integrated combination product risk management enables robust product development and manufacturing strategies as well as facilitates alignment with regulators for efficient regulatory pathways and predictable outcomes.

Assessment of crowdsourced social media data and numerical modelling as complementary tools for urban flood mitigation

ABSTRACT This paper explores how crowdsourced social media data complements urban flood modelling to improve model performance and achieve a better classification of impacts. In addition to georeferencing flood impacts, Twitter allows monitoring the events in terms of hazards and impacts, and YouTube facilitates a retrospective analysis from audiovisual data. The analysis of 2800 tweets collected during four storm events and of almost 900 videos of the recent history of the basin, together with the implementation of a high-resolution model, contributed to the expansion of the capacity to represent the temporal and spatial scales of the problem. The complementation of crowdsourced social media data and urban modelling enhances the understanding of the flood dynamics, thus offering a framework of greater certainty for the generation of flood risk management products.

Sustainable supply chain management performance in post COVID-19 era in an emerging economy: a big data perspective

PurposeBig data analytics capabilities are the driving force and deemed as an operational excellence approach to improving the green supply chain performance in the post COVID-19 situation. Motivated by the COVID-19 epidemic and the problems it poses to the supply chain's long-term viability, this study used dynamic capabilities theory as a foundation to assess the imperative role of big data analytics capabilities (management, talent and technological) toward green supply chain performance.Design/methodology/approachThis study was quantitative and cross-sectional. Data were collected from 374 executives through a survey questionnaire method by applying an appropriate random sampling technique. The authors employed PLS-SEM to analyze the data.FindingsThe findings revealed that big data analytics capabilities play a significant role in boosting up sustainable supply chain performance. It was found that big data analytics capabilities significantly contributed to supply chain risk management and innovative green product development that ultimately enhanced innovation and learning performance. Moreover, innovation and green learning performance has a significant and positive relationship with sustainable supply chain performance. In the post COVID-19 situation, organizations can enhance their sustainable supply chain performance by giving extra attention to big data analytics capabilities and supply chain risk and innovativeness.Originality/valueThe paper specifically emphasizes on the factors that result in the sustainability in supply chain integrated with the big data analytics. Additionally, it offers the boundary condition for gaining the sustainable supply chain management.

Risk Management of Startups of Innovative Products

The activation of the startup movement is one of the fundamental preconditions for the transition from innovation to a startup ecosystem, the development of which is impossible without special innovation structures that help startups promote innovative products on the market. The purpose of this article is to modernize the process of promoting innovative products on the market in the form of startups, taking into account the trends of the innovative development of the modern economy. The following methods are used in the article: situational and design approaches; methods of simulation and structural−functional modeling—to determine the potential market demand for innovative products and plan the process of their promotion to the market; and BPMN notation—to formalize the integration links between actors in the process of promoting innovative products on the market. As a result, a scheme for assessing the economic efficiency of innovative product market promotion process management was developed that sorts out several indicators at each stage of the innovation process, which allows one to increase the clarity and completeness of the promotion process management while reducing costs. The system of risk management of innovative products has been studied using the example of the promotion of the innovative startup Hideez Technology Ltd on the market in Europe and the USA. This has allowed the company to benefit economically from implementing the results, reaching USD 20,000. In conclusion, the sequence of actions for making management decisions during the implementation of the strategy for innovative product promotion process management was defined.