Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

From Law of the Sea to Legal Underwriting: FinLegalTech

537 views

Published on

Professor Michael Bommarito, CEO, LexPredict, charts the course of risk management and law from the first written risk transfer devices in Rhodes to the modern alternative risk transfer market, ending with the question: what can law learn from the history of finance and insurance?

This talk was first presented at Fin(Legal)Tech on November 4, 2016 at ILLINOIS TECH - CHICAGO KENT COLLEGE OF LAW.

Published in: Law
  • Be the first to comment

From Law of the Sea to Legal Underwriting: FinLegalTech

  1. 1. Empowering the future of legal decision-making © LexPredict 2012-2016 @lexpredict www.lexpredict.com contact@lexpredict.com From Law of the Sea to Legal Underwriting Professor Michael Bommarito CEO, LexPredict Illinois Tech - Chicago Kent University of Michigan
  2. 2. 2 (drinks on me) Inspiration and Context First Recorded Insurance (ca. 1000 B.C.E.; translation) First Catastrophe Bond/ILS (1997) 1. Excluding bottomry and respondentia under Babylonian law. 2. Figure 7.5 from Alternative Risk Transfer, Erik Banks (Wiley Finance), pp. 126.
  3. 3. 3 (equitability without price) Codified Risk Transfer 1. English translation from Opinions of Paulus, a Roman jurist ca. 2. For more on the Osaka, cf: https://goo.gl/PE2X5O First Recorded Insurance (ca. 1000 B.C.E.; translation) “It is provided by the Lex Rhodia that if merchandise is thrown overboard for the purpose of lightening a ship, the loss is made good by the assessment of all which is made for the benefit of all.”
  4. 4. 4 Computational Law Leibniz (De Arte Combinatoria, 1666) Ethereum & Solidity (2013) 1. For more on Leibniz’s journey and I Ching, cf: Leibniz: An Intellectual Biography: Maria Rosa Antognazza. SOLIDIT Y =
  5. 5. 5 But when? Today ? The Future
  6. 6. 6 (including, but not limited to) Types of Hazard/Risk Liquidity “you” don’t have funds on hand (or ability to convert assets to funds) when you need them Longevity “you” live longer than expected Mortality “you” die unexpectedly Counterparty “you” have assets or cashflows tied to another party’s solvency and behavior Geopolitical “you” have assets or cashflows tied to a region or political entity’s institutions and behavior Natural Catastrophe “you” have assets or cashflows tied to mother nature (and even father sky)
  7. 7. 7 (“legal” flavors) Types of Hazard/Risk Counterparty Geopolitical Employment Litigation Regulatory & Compliance Intellectual Property
  8. 8. 8 (on the one hand) Types of Hazard/Risk Employment Workers Comp. Litigation Professional Liability
  9. 9. 9 (and on the other) Types of Hazard/Risk 1. Left to right: Myles Jack ($5M), Jaylon Smith ($5M), Ifo Ekpre-Olomu ($3M).
  10. 10. 10 Why the Disparity? common wisdom(s) Risk Transfer Frequency of Events Severity of Events Event Models Data Availability Data Consistency Data Quantity Moral & Morale
  11. 11. 11 (really?) Why the Disparity? 1. Placement slip for the infamous passage of the HMS Titanic. Lloyd’s Subscription Room (engraving, Thomas Rowlandson, 1809)
  12. 12. 12 (really?) Why the Disparity? 1. John Speed, ca. 1630. 2. Van Den Keere, ca. 1610.
  13. 13. 13 (“cult of the expert”) Syndicate of One 1. Placement slip for the infamous passage of the HMS Titanic. Maritime Hazards, ca. 1800 Legal Hazards, ca. 2016
  14. 14. 14 Why the Disparity? common wisdom(s) Risk Transfer Frequency of Events Severity of Events Event Models Data Availability Data Consistency Data Quantity Moral & Morale Cultural
  15. 15. 15 (“cult of the expert”) Syndicate of One 1. Placement slip for the infamous passage of the HMS Titanic. Decision-Making Science, ca. 2016 Legal Hazards, ca. 2016 vs.
  16. 16. 16 (“cult of the expert”) Syndicate of One 1. Placement slip for the infamous passage of the HMS Titanic.
  17. 17. 17 (“cult of the expert”) Syndicate of One 1. Diagram generated from LexSemble/LexPredict Dispute Analyzer.
  18. 18. 18 Outside Counsel Internal Staff Algorithm (a legal ensemble) Syndicate of Many Partners Associates Labor Litigation Wrongful Termination Model
  19. 19. 20 Outside Counsel Internal Staff Algorithm (a legal ensemble) Syndicate of Many Partners Associates Labor Litigation Wrongful Termination Model
  20. 20. 21 (a legal ensemble) Syndicate of Many
  21. 21. 22 Context Today ? The Future
  22. 22. 23 Goal Colossus 2020-I A (First US Legal-Linked Security) 1. Wood engraving of the Colossus of Rhodes, Sidney Barclay, ca. 1875. 2. For contrary thoughts on securitization, cf: https://ssrn.com/abstract=2320030 3. Bonus: Colossus Mark 1 was also the first GP digital computer.FIN
  23. 23. Empowering the future of legal decision-making © LexPredict 2012-2016 @lexpredict www.lexpredict.com contact@lexpredict.com From Law of the Sea to Legal Underwriting Professor Michael Bommarito CEO, LexPredict Illinois Tech - Chicago Kent University of Michigan

×