Model Risk Management
The discipline of identifying, measuring, and controlling risks from models, including AI models used in insurance decisions.
Model risk management (MRM) is the discipline of identifying, measuring, monitoring, and controlling risks that arise from using models. In insurance, it covers actuarial models, underwriting models, pricing models, claims models, and increasingly AI systems.
MRM programs typically include model inventory, validation, risk tiering, ongoing monitoring, and governance oversight. The goal is to ensure that models are fit for their intended use, understood by stakeholders, and aligned with the company’s risk appetite.
The NAIC Model Bulletin and state AI rules borrow heavily from MRM principles, and the evaluation tool’s structure expects a lifecycle approach any MRM professional will recognize. The adjacent entries on the AI Systems Program, model validation, and model drift map those ideas onto their insurance-AI equivalents.