Insurance & Reinsurance…as simple as “A, B, C” but much more dangerous!
Wednesday, 1 August, 2012 Leave a comment
Apparently my (lone) voice isn’t sufficient to alert the UK financial & insurance industry to the folly of their perspective on “risk”! So, I am eternally grateful to Tim Harford for this presentation!
PLEASE watch this and don’t make the mistake of thinking that the “problem” relates only to Oil disasters, Financial or Nuclear meltdowns. The lesson is that, if the means of communicating INFORMATION, quickly and effectively, between business units, is impaired in complex systems (and that includes relatively small businesses), events WILL happen faster than you or “the system” can react and can have HUGE, unforeseen [not unforeseeable] consequences. This is the nature of the world as we now know it.
This should be required viewing for every underwriter, risk manager, insurance company executive, banker and regulator…except that many of them already KNOW precisely how risk cascades and spreads. I am constantly amazed how many learned people, in finance and insurance, who talk about “contagion” and “systemic risk” as if it is something that they don’t have to worry about! THE PROBLEM IS, THEY DON’T KNOW HOW TO ADDRESS THE PROBLEM, SO HAVE FILED IT UNDER “INCONVENIENT TRUTH”, waiting for the time when the shit hits the fan (again) so they can try to convince us that failure was unforeseeable – a Black Swan event – they don’t want to have to admit how little they know about causality, preferring instead to rely upon historic risk data…as if our industrial past holds all the answers we need in our extremely complex, inter-connected, Digital present and future.
Tim talks in great detail about the failures that led to the loss of 167 lives on the Piper Alpha Oil rig and how the sheer volume of data means we can miss vital INFORMATION that could serve as a means of crisis anticipation.
Now, if you have read any of my previous blogs about complexity and risk, you will know that just because “they” say they don’t know what the answer to problem is, doesn’t mean that there is no answer.
BECAUSE THERE IS! This is why I was so excited by what Ontonix, under the inspirational leadership of Dr Jacek Marczyk, had developed and why I keep going on about it DESPITE the enormous challenge of cracking “institutional inertia”.
I would like to highlight a previous article from 2010: Does complexity guarantee “system failure”?
NOT because I am not trying to claim to be so far ahead of the curve here BUT to try to illustrate that the knowledge is out there but too many people who have the power to do something about it AREN’T…go figure!!!