Tech investment comapny Qraft Technologies has expanded its partnership with insurance firm Hana Life to offer a range of variable life insurance funds powered artificial intelligence (AI).

The collaboration between the two companies, which dates back to 2019, has put a total of six new funds on the market.

According to a Qraft press release, it is using propreitary AI models “to quickly identify complex investment trends through the analysis of vast amounts of financial market data to proactively manage risks and adjust risk exposure to the funds’ asset classes.”

GlobalData’s most recent executive briefing forecasts the AI market to grow to $909bn by 2030, with a CAGR of 35% over the 2022-30 period.

Speaking to Life Insurance International, Qraft COO Francis Oh explained the significance of this move, how the AI models work and the challenges they encountered developing AI-powered funds.

What is the significance of the expansion of Qraft’s partnership with Hana Life, and how do you anticipate it affecting the industry?

Qraft Technologies has been dedicated to transforming investing using AI since our inception in 2016. One of our most significant contributions to society is providing better investment products by leveraging AI in life insurance variable annuity offerings.

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Since 2019, Qraft’s AI model has powered Hana Life’s Variable Insurance products demonstrating a proven track record of delivering better investment results by effectively assessing market downside risk and mitigating portfolio drawdowns. This successful implementation of artificial intelligence in Hana Life’s AI-powered Variable Insurance has led to a total of eight life insurance companies in South Korea launching 23 Variable Annuity products available to investors.

I anticipate further adoption in the US life insurance industry as it embraces artificial intelligence. By harnessing the predictive capabilities of AI, life insurance providers can offer innovative products tailored to client demands.

How are Qraft’s AI models designed to specifically address the needs of investors of insurance products?

Currently, Qraft provides six different models to Hana Life. The core element of these models lies in proactive risk detection, analyzing vast amounts of data to identify market changes.

Additionally, Qraft builds multi-asset portfolios that do not rely solely on conventional correlation assumptions between asset classes. Instead, our AI models leverage predictive power to enhance risk management. Investors in insurance products can expect better risk-adjusted returns through this approach.

What differentiates Qraft’s AI-powered funds from competitors? Who are Qraft’s main competitors in life insurance partnerships?

When it comes to differentiation, Qraft Technologies stands out from its competitors. While we often compete with in-house AI initiative teams from life insurance companies or asset managers, our unique advantage lies in being an independent AI solution provider. Qraft’s key differentiators include:

  • Expertise and Independence: Our team comprises over 80 members who possess a deep understanding of AI models and their implications for financial market products. We combine expertise in both artificial intelligence research and financial markets, giving us a competitive edge.
  • Intangible Asset: Our journey since 2016 has built an intangible asset. From the outset, we’ve consistently adopted state-of-the-art AI models for our clients. Currently, more than 25 institutional investors globally-ranging from global investment banks to asset managers and life insurance companies-partner with Qraft Technologies. Together, we’re poised to provide AI-powered investment solutions and products to clients. Backed by SoftBank Group with an investment of $146 million since 2022, Qraft continuously develops and researches customized solutions for our B2B clients in the financial industry.

What challenges did Qraft encounter developing AI-powered funds for life insurance?

Being a pioneer requires significant effort to shape the market. Qraft Technologies faced challenges such as client education, proof-of-concept processes, and the task of conveying the benefits of artificial intelligence to prospects and clients.

However, since 2023 widespread adoption of various generative AI models (ChatGPT, CoPilot, and Bard) has elevated public AI literacy. AI is no longer optional – it’s a necessity. It’s difficult to imagine using outdated practices and not leveraging the transformative power of AI today.

How does Qraft’s AI engine effectively manage risks using AI models?

Our AI models are meticulously designed and trained to achieve specific outcomes. Each model is custom-architected taking into account relevant capital market data including macro indicators and asset-specific information such as momentum, volatility, and correlation and further with the unstructured data from market sentiment. By using this data as input, we train our model to detect market regimes, particularly downturns and volatility spikes – critical moments when investors require effective hedging strategies.

A notable example of our AI model’s accuracy occurred during the COVID-19-triggered crash in March 2020. The AI model successfully forecasted the market downturn associated with the COVID-19 crisis by sending a risk off signal. As a result, potential losses were significantly mitigated. Our model also predicted and sent a risk off signal prior to the Silicon Valley Bank collapse in March 2023.