The Drama and Chess of Insurance Risk Management

The way that insurance companies look at risk has changed dramatically over the last 20 years and there are lessons we can learn from this evolution. 

Being systematically imaginative is key in risk management, and the chess club and the drama club concept is deliberately playful and thinks in terms of two extremes, the chess club and the drama club. It encourages you to be self-aware and think about which club would you rather join, the chess club or the drama club? Looking to deliberately imagine and include the other club’s perspective - using ‘Club Mix questions’ - can make risk management more resilient and creative. 

In the insurance industry we use the drama club to create scenarios and reverse stress tests - the stories which imagine what might go wrong. The chess club also have models and help quantify and articulate our tolerance for a risk, manage and model it. Are we overcomplicating the improbable? Overdramatising the probable?

Are there things that we are missing which would help us make our models and their outcomes more relevant to insurance executives and regulators by drawing on lessons about embracing uncertainty from artists and philosophers to integrate vital longer term issues in our short-term 1:200 modelling.