Description: This article discusses how complex models can provide a false sense of security, hiding the evidence that the entire range of indications may hinge on one or two key assumptions.

Description: Complex models can provide a false sense of security, hiding the evidence that the entire range of indications may hinge on one or two key assumptions. Use data-driven assumptions, making sure the time series includes stressed environments when possible. If a model of underwriting risk indicates that the probability of accident year combined ratios experienced from 1998 to 2000 is remote, it is not a realistic model