campbell
11-24-2008, 08:08 AM
http://www.iht.com/articles/2008/11/20/business/rriskin.php
No comments from me right now. Just some excerpts:
Call in the philosophers, call the psychologists. The idea of risk, the most fundamental concept in the insurance industry, is undergoing its most rigorous analysis in decades.
As the financial crisis sweeps Wall Street and Europe, big insurers are scrambling to unearth flaws in their core assumptions about the chances for financial outcomes - and to devise new ways to cope with uncertainty and "slippery slopes," both for themselves and the companies that buy their products.
"With this crisis, everybody is re-evaluating the concept of risk management," said Richard Phillips, a professor of risk management and insurance at Georgia State University, which has a leading program for insurance studies.
....
Because nearly all risk-management models failed to predict or protect against the crisis, Fox said, insurers will increasingly view risk "more as a function of behavior than of models."
Going forward, she said, insurers will use models "as a point of information, but it won't drive risk tolerance" or the appetite for making financial and other bets.
....
"They weren't thinking about how the degree of risk in the system might be changing. They weren't thinking beyond their own models. Risk management is about making choices, not preventing losses. I don't think chief risk officers were asking that question."
No comments from me right now. Just some excerpts:
Call in the philosophers, call the psychologists. The idea of risk, the most fundamental concept in the insurance industry, is undergoing its most rigorous analysis in decades.
As the financial crisis sweeps Wall Street and Europe, big insurers are scrambling to unearth flaws in their core assumptions about the chances for financial outcomes - and to devise new ways to cope with uncertainty and "slippery slopes," both for themselves and the companies that buy their products.
"With this crisis, everybody is re-evaluating the concept of risk management," said Richard Phillips, a professor of risk management and insurance at Georgia State University, which has a leading program for insurance studies.
....
Because nearly all risk-management models failed to predict or protect against the crisis, Fox said, insurers will increasingly view risk "more as a function of behavior than of models."
Going forward, she said, insurers will use models "as a point of information, but it won't drive risk tolerance" or the appetite for making financial and other bets.
....
"They weren't thinking about how the degree of risk in the system might be changing. They weren't thinking beyond their own models. Risk management is about making choices, not preventing losses. I don't think chief risk officers were asking that question."