Risk/Reward Researchers Win Lloyd's Prize
Klaus Wunderlich and colleagues at the UCL Wellcome Trust Centre for Neuroimaging showed how humans' brains learn correlations between risk and reward and use this in decision-making.
Lloyd's awarded five 2011 Science of Risk Prizes on Nov. 24, including the top prize to Klaus Wunderlich and colleagues at the UCL Wellcome Trust Centre for Neuroimaging. Their groundbreaking research showed how humans' brains learn correlations between risk and reward and use this in decision-making.
Wunderlich was named overall winner and won the Behavioural Category prize.
The team used brain-scanning technology to reveal how the human brain makes risk-taking decisions. They concluded the brain may be better at learning through experience and continuous observations than from studying statistics or charts. The findings -- which are relevant for underwriters who make financial decisions based on understanding correlations -- could be used to promote better decision-making strategies, according to their paper.
"The paper gives insight into how the brain is capable of learning from prior experience, and how this influences the decisions we make," said Trevor Maynard, head of Lloyd's Exposure Management and a member of the judging panel. "The entry stood out as behavioral risk is such an important topic for insurance and because the paper is stimulating research into this key topic."
Other winners conducted research on climate modeling; post-catastrophe satellite-based damage mapping; fire risk analysis; and capital allocation calculations for insurers.
The Lloyd's Science of Risk Prize was created last year to recognize outstanding scientific research that improves insurers’understanding of risk in a number of fields. The initial prize went to a researcher for his paper on improving the accuracy of long-range hurricane forecasting. The overall winner receives a £5,000 cash prize, while category winners take home £2,000 each.