Morgan Stanley Calls for Model Overhaul as Verisk’s Index Predicts 66% Iran War Probability
MS•Morgan Stanley warns that risk models based on historical data are outdated and urges adoption of forward-looking conflict scenarios, while Verisk Maplecroft launched a Predictive War Index. Back-testing showed a 66% probability of the Iran war 1½ months before it began, while a Geopolitical Relations Index tracks bilateral tensions.
1. Industry Shift to Forward-Looking Conflict Models
Morgan Stanley and other financial institutions have begun questioning legacy risk frameworks that rely solely on past data, citing the rapid rise in global conflict costs—now nearly $22 trillion annually, over 10% of world GDP. Firms are exploring predictive approaches to price commodities, credit and insurance products with updated geopolitical scenarios.
2. Predictive War Index Details
Verisk Maplecroft’s Predictive War Index uses machine learning trained on political, economic and social data from 1995 to 2022 to forecast a country’s war probability over the next 12 months. Initial back-testing indicated a 66% chance of conflict in Iran 1½ months before hostilities began, illustrating the model’s potential early-warning capability.
3. Geopolitical Relations Index Overview
The Geopolitical Relations Index assesses bilateral tensions by analyzing past military clashes, governmental similarity and geographic proximity. The tool provides dynamic scoring of country pairs, enabling investors and insurers to quantify shifts in diplomatic and strategic risk exposure.
