“Insolvent insurers not a systemic risk”– Insurance Insight

Link to report

Well that is reassuring…isn’t it!?

I have (quickly) read through the report and, whilst it is hard to argue that, based upon past experience, Insurers and Re-insurers ARE of “systemic importance”*, several key points appear to be overlooked…or, perhaps ASSUMED. Probably not the best starting point for such a, potentially significant, report!

Here are a few of the issues that struck me as worthy of comment, or questions:

  • impact of sovereign/banking default or collapse [cascading] on Capital liquidity
  • the inter-connections amongst individual (micro) and institutional investors (macro)
  • lack of transparency in relation to “counter party” relationships          [ins – ins – rein – fin. mkt. – ins – rein, etc.]
  • insurers obtain adequate information to understand, accurately assess and rate risks*, that are,
  • mostly idiosyncratic and uncorrelated”, and
  • “insured loss events are not normally correlated with financial crises or economic cycles” [risk – “known”]
  • reserve and reserving adequacy
  • customer/insurer, etc. implement effective risk management – dampens rather than amplifies risk
  • there is no need to differentiate or adapt risk strategy for uncertainty [unseen – “unknown”]
  • “complexity” is NOT a source of “unseen” risk that, unmanaged, adds to uncertainty
  • major sources of risk are exogenous
  • failure or collapse are gradual, manageable and “top down”
  • Reputational or Operational risks are not  major threats…

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Agile or fragile?:: organizational complexity is a waste farm

This article is another example of a lesson for Organizations to be prepared for “exaptation”. I have mentioned (more than once!) about the “universality of systems” and that, organizations that are “too busy chopping wood to sharpen the axe” are doing themselves and their stakeholders a great dis-service. Why not consider and embrace, tried and tested, solutions from other sectors and disciplines…instead of sticking to management structures, that were designed to oversee people and linear processes…in the (now past) Industrial era?

15-Global ChallWe are now inter-connected components in a “Knowledge Economy”, existing in the Digital Age. The most successful Complex systems are those with an interdependent Operational Structure to “support” the effective exchange of information.

Even when unseen, we now appreciate the importance of effective information-flow within and among networks of systems. Although I vaguely recall reading that this isn’t a direct quote from Charles Darwin (I am happy to leave others to investigate that) THE message is clear. He wasn’t talking about organizations per se but he was talking about biological systems:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change. In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.

Yeah we ALL know how tough trading is in the current climate! So, why exacerbate the problem by failing to observe information from the environment?

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Reblog:: organizations as complex systems

A system is composed of regularly interacting or interdependent groups of activities that form a whole. A change in one aspect can affect change in other aspects.
Organizations are dynamic, living entities that have been put together to accomplish some type of purpose — they are goal oriented. The number and variety of parts to an organization can be truly astonishing. In an attempt to provide order, the organization establishes many of the rules, roles, and behaviours that individuals will and should follow to maintain their organizations. To a large extent, individuals and groups determine the development of an organization. An organization’s structure, tasks, and methods evolve out of the history of the organization’s transactions with its changing members and environment.

Applied Organizational Communication: Theory and Practice in a Global Environment
By Thomas E. Harris, Thomas E. Harris (Ph. D.), Mark D. Nelson

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