CQC and AXA explore applications in financial risk management

Introduction

The partnership between Cambridge Quantum Computing and AXA represents a significant milestone in bringing quantum computing applications to the insurance and financial services sector. Cambridge Quantum Computing, a global leader in quantum software and quantum security, joined forces with AXA, a multinational insurance firm headquartered in France, to investigate how quantum computing could revolutionize traditional insurance practices. This collaboration emerged from the recognition that the insurance industry faces increasingly complex computational challenges, from pricing exotic derivatives to optimizing large portfolios and assessing correlated risks across global markets. The partnership aims to use CQC’s expertise in quantum algorithms, quantum machine learning, and quantum cryptography to address AXA’s computational needs. By combining CQC’s cutting-edge quantum software capabilities with AXA’s deep domain knowledge in insurance and risk management, the collaboration seeks to develop practical quantum solutions that could provide competitive advantages in areas such as risk modeling, fraud detection, portfolio optimization, and cybersecurity.

Challenge

The insurance industry faces several computational challenges that classical computing struggles to address efficiently. AXA, like many global insurers, must process vast amounts of data to price products accurately, assess risks, and optimise investment portfolios. Traditional Monte Carlo simulations used for risk assessment and pricing can require extensive computational resources and time, especially when dealing with high-dimensional problems or rare event modeling. Additionally, the increasing complexity of financial instruments and the need to model correlations between multiple risk factors create computational bottlenecks that limit the speed and accuracy of decision-making. Cybersecurity presents another critical challenge, as insurance companies handle sensitive customer data and face growing threats from quantum computers that could potentially break current encryption standards. AXA recognised that quantum computing could offer exponential speedups for certain types of calculations and provide quantum-safe security solutions. The challenge was to identify specific use cases where quantum algorithms could provide near-term advantages and to develop a roadmap for integrating quantum technologies into existing workflows without disrupting current operations.

Solution

Cambridge Quantum Computing developed a multi-faceted quantum solution tailored to AXA’s specific needs. The primary focus was on implementing quantum algorithms for Monte Carlo simulations, which are fundamental to insurance pricing and risk assessment. CQC utilized variational quantum algorithms and quantum amplitude estimation techniques to potentially achieve quadratic speedup over classical Monte Carlo methods. For portfolio optimization, the team explored quantum approximate optimization algorithms (QAOA) and variational quantum eigensolvers (VQE) to handle the complex constraint optimization problems inherent in large-scale portfolio management. In the cybersecurity domain, CQC implemented its IronBridge quantum random number generation platform to enhance cryptographic key generation and developed quantum-safe encryption protocols to protect against future quantum threats. The solution also incorporated CQC’s proprietary TKET quantum software development platform, which allowed AXA’s teams to experiment with quantum algorithms without needing deep expertise in quantum physics. Additionally, CQC developed hybrid classical-quantum algorithms that could run on near-term quantum devices, ensuring practical applicability despite current hardware limitations.

Implementation

The implementation process began with a comprehensive assessment phase where CQC’s quantum experts worked closely with AXA’s actuarial and IT teams to identify high-value use cases. The teams established a quantum computing center of excellence within AXA, providing training and resources to build internal quantum literacy. CQC deployed its quantum software stack, including the TKET compiler and runtime, which enabled AXA to run quantum algorithms on various quantum hardware platforms through cloud access. The implementation followed an agile approach, starting with proof-of-concept projects for specific risk modeling scenarios. For the Monte Carlo acceleration use case, the teams developed quantum circuits for option pricing and tested them on both quantum simulators and actual quantum hardware from IBM and Honeywell. The cybersecurity implementation involved integrating CQC’s quantum random number generators into AXA’s existing security infrastructure, with careful testing to ensure compatibility and performance. Throughout the implementation, CQC provided ongoing support and optimization services, continuously refining the quantum algorithms based on performance metrics and feedback from AXA’s teams. The partnership also established clear benchmarking protocols to compare quantum solutions against classical alternatives.

Results and Business Impact

The partnership yielded several significant results that demonstrated the potential of quantum computing in insurance applications. In pilot projects focusing on exotic derivative pricing, the quantum algorithms showed promising speedup potential, with theoretical analyses indicating possible quadratic advantages as quantum hardware scales. While current quantum devices limited the size of problems that could be solved, the proof-of-concept implementations validated the algorithmic approach and provided a clear path for future scaling. The quantum random number generation implementation immediately improved the quality of cryptographic keys used in AXA’s systems, enhancing overall security posture. From a business perspective, the partnership positioned AXA as an innovation leader in the insurance sector, attracting talent and demonstrating commitment to cutting-edge technology adoption. The collaboration also resulted in several joint research publications and patents, creating intellectual property value for both organisations. Internal surveys showed increased employee engagement with emerging technologies, and the quantum literacy programs helped AXA build capabilities for the quantum future. The partnership generated valuable insights into the practical challenges of quantum computing adoption in enterprise environments, informing both companies’ strategic planning.

Future Directions

Looking ahead, Cambridge Quantum Computing and AXA plan to expand their collaboration as quantum hardware continues to improve. The roadmap includes developing more sophisticated quantum machine learning algorithms for fraud detection and customer behavior prediction, areas where quantum computers could process complex pattern recognition tasks more efficiently than classical systems. The partnership will explore quantum natural language processing applications for analysing unstructured insurance claims data and improving customer service automation. As fault-tolerant quantum computers become available, the teams plan to tackle larger optimization problems, including real-time portfolio rebalancing and dynamic pricing models that account for multiple correlated risk factors. The collaboration will also focus on developing quantum-classical hybrid architectures that can seamlessly integrate with AXA’s existing IT infrastructure. Both organizations are committed to contributing to quantum computing standards and best practices for the financial services industry, potentially expanding the partnership to include other insurers and financial institutions in a consortium approach.