SCOR, the global reinsurer, has announced funding for an initiative by Lancaster University Management School (LUMS) to develop advanced forecasting tools for climate-related risks.
The two-year support from SCOR’s Corporate Foundation for Science will enable the university to enhance its Climate Risk and Uncertainty Collective Intelligence Aggregation Laboratory (CRUCIAL).
CRUCIAL uses "prediction markets” – mechanisms that aggregate diverse sources of knowledge and expertise – to generate long-term forecasts of climate-linked outcomes.
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The project, led by Dr Kim Kaivanto of LUMS and supported by Exeter University, seeks to address the challenges of forecasting in a world where historical weather records are becoming less reliable due to the effects of climate change.
Prediction markets leverage diverse data sets and expertise to forecast events such as hurricanes, which begin in warm ocean waters and can cause extensive damage to agriculture, property, and human life. According to Kaivanto, traditional forecasting tools are increasingly insufficient in a changing climate, making innovative approaches essential.
“As our world’s climate changes, data from distant decades become less useful guides to the future. Yet, accurate forecasting is arguably more crucial – to save lives, to inform adaptation, and protect our global economy," he said.
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The CRUCIAL project aims to build joint-outcome markets capable of forecasting the interplay between variables such as global temperature anomalies and atmospheric CO₂ concentrations.
Kaivanto said that understanding the dependence between these variables would enhance decision-making in policy and planning. The initiative aspires to develop forecasts with horizons extending multiple years or even decades.
SCOR’s involvement reflects the reinsurance sector’s focus on improving climate risk assessments.
Philippe Trainar (pictured above), director of the SCOR Corporate Foundation for Science, highlighted the role of prediction markets in synthesizing diverse information in contentious areas like climate change.
“The consequences of climate change are currently and will remain in the future the subject of lively controversy between experts," Trainar said. "Prediction markets have demonstrated their unrivaled capacity to anticipate future trends in such controversial areas, where it is necessary to quickly combine scientific results, statistical observations, and learning from experience."
SCOR said that its philanthropic foundation supports research and academic work related to risk analysis. Its funding for CRUCIAL will cover the infrastructure and personnel needed to run prediction markets, as well as incentives for participants.
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