UK consortium to tackle systemic risk

The Cambridge Centre for Risk Studies (CCRS) at the University of Cambridge Judge Business School is launching a new research consortium on protecting society from future systemic risks. Funding will be provided by an international consortium of companies including Pool Re, the UK’s reinsurance mutual.

The research will support the creation and extension of private-public market institutions and develop new risk transfer products and advisory services. These may include:

• extensions of coverage terms for traditional insurance lines of business
• new types of insurance indemnification or risk sharing products
• structured parametric bonds
• corporate pools
• bi-party swaps
• other financial instruments

It will cover topics such as pandemics, cyber threats, geopolitical change, financial crisis, and climate change.

Julian Enoizi, chief executive officer of Pool Re, and chairman of the industry consortium, said, “The COVID-19 pandemic triggered the deepest economic recession in our lifetime. Our policies, preparedness and financial responses require a significant overhaul if we are to better equip and protect society from the next major systemic risk that threatens our way of life.”

Dr Andrew Coburn, chief scientist at CCRS, said, “Systemic resilience needs the foresight of systemic backstops to which capital markets can respond. Modelling to support new financial instruments will be critical in addressing future crises.”

Professor Daniel Ralph, academic director at CCRS, added: “GDP-sized government interventions have been the solution to pandemic-sized events, but government action at this scale is typically ad hoc – better regulatory and financial structures are needed to protect societies from long-term erosion of wealth.”

Dr Trevor Maynard, director of systemic risk research at CCRS, said, “We look forward to applying our world-class research techniques to test and develop many of the initiatives being proposed. This will advance our research on the causes, linkages, and protection mechanisms for future systemic threats to society and the economy.”