The introduction of new accounting and prudential standards will ineluctably lead the insurance industry to apply internal models across an unprecedented scope. At the same time, the recent crisis in financial markets revealed the limits of mathematical strategies and the dangerous weaknesses inherent to certain models.

By endowing a new Chair of Excellence in Modeling Management, BNP Paribas Assurance is encouraging the development of academic research in this field. The endowment provides researchers with the resources required to pursue significant long-term work.
This cross-disciplinary chair brings together researchers from varied horizons, including economists, actuaries and financial statisticians. It is integrated within the Laboratoire de Sciences Actuarielle et Financière (Actuarial and Financial Sciences Laboratory) of the Institut de Science Financière et d'Assurances (ISFA), a school that is part of Université Claude Bernard Lyon 1.

“Over and above the operational aspects of developing internal models designed to simulate the behavior of insurance policyholders and managers over a 30-year horizon, we want to gain a certain perspective in relation to these models,” notes Renaud Dumora, BNP Paribas Assurance Head of Finance and Risk Management. “The widespread application of these models in such areas as accounting, solvency, rate calculations, etc. will profoundly impact the management strategies of insurance companies, as well as the market in general. Our intention is that this crossdisciplinary chair contribute to world-class research in insurance and provide input for our longterm
strategic thinking.”

The objective of the Chair in Modeling Management is to correctly situate the use of mathematical models within the overall human decision process at insurance companies, and help them efficiently adapt to a changing world. The chair will also foster a better understanding of what such models can contribute, as well as their limits, thus avoiding the extremes of either blind confidence
in models or, on the contrary outright rejection due to distrust of a complex technique that is widely employed by the insurance industry.

BNP Paribas Assurance will nurture close relations with the research community as both a frontline stakeholder and an agent of economic change committed to:

• contributing to better understanding of the transformation of insurance providers;
• providing researchers with access to its expertise in internal models and insurance
  techniques.

Research within the framework of the chair will focus on several areas:

• Understanding and mathematical modeling of complex relationships between the different risks to which an insurance company is exposed. This aims to improve internal models, to quantify the risk inherent to the model, and to integrate internal models in information systems.
• The implications of applying internal models for the organization of insurance companies and their competitive, regulatory and prudential environment.
  

The ISFA school at Université Claude Bernard Lyon 1 has become a leader in the actuarial sciences in France, recognized for top-flight instruction and for the quality of its research. The school is home to the only actuarial sciences laboratory in the country. This newly endowed chair provides a tangible vehicle for the close relationships developed between the ISFA and the world
of finance and insurance, particularly BNP Paribas Assurance.

Lionel Collet, President of Lyon 1 University, welcomed the creation of this chair for excellence, stating: “This chair enables us to apply our academic expertise to meeting the new European regulatory requirements for the insurance industry. In an increasingly complex world, universities have an obligation to engage with the fundamental issues facing society.” The chair is managed by the Lyon 1 Partnership Foundation.

The governance structure for the chair provides for an advisory board and a steering committee. The advisory board will oversee strategic aspects of the chair's functioning, while the steering committee is responsible for chair leadership and scientific policy. Scientific coordination will be ensured by Jean-Paul Laurent (professor at Université Paris 1) and Véronique Maume-Deschamps
(Professor at Université Lyon 1).

BNP Paribas Assurance's participation in the work of the CFO Forum, the Fédération Française des Sociétés d'Assurance and the Institut des Actuaires reflects an ongoing commitment to shaping positive trends in new accounting and prudential rules applicable to solvency and governance.