Believing the Bot - Model Risk in the Era of Deep Learning

40 Pages Posted: 5 Sep 2019

See all articles by Ronald Richman

Ronald Richman

Old Mutual Insure; University of the Witwatersrand

Nicolai von Rummell

QED Actuaries and Consultants

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: August 29, 2019


Deep Learning models are currently being introduced into business processes to support decision-making in insurance companies. At the same time model risk is recognized as an increasingly relevant field within the management of operational risk that tries to mitigate the risk of poor business decisions because of flawed models or inappropriate model use. In this paper we try to determine how Deep Learning models are different from established actuarial models currently in use in insurance companies and how these differences might necessitate changes in the model risk management framework. We analyse operational risk in the development and implementation of Deep Learning models using examples from pricing and mortality forecasting to illustrate specific model risks and controls to mitigate those risks. We discuss changes in model governance and the role that model risk managers could play in providing assurance on the appropriate use of Deep Learning models.

Keywords: Deep learning, Model Risk, Pricing, Mortality Forecasting, Insurance Modelling

JEL Classification: C14, C23, C38, G22, J10

Suggested Citation

Richman, Ronald and von Rummell, Nicolai and Wuthrich, Mario V., Believing the Bot - Model Risk in the Era of Deep Learning (August 29, 2019). Available at SSRN: or

Ronald Richman (Contact Author)

Old Mutual Insure ( email )

Wanooka Place
St Andrews Road
Johannesburg, 2192
South Africa

University of the Witwatersrand ( email )

1 Jan Smuts Avenue
Johannesburg, GA Gauteng 2000
South Africa

Nicolai Von Rummell

QED Actuaries and Consultants ( email )

38 Wierda Road West
Johannesburg, Gauteng 2196
South Africa

Mario V. Wuthrich

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092

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