Are black boxes creating Black Swans? As regulation for the global insurance industry tightens and converges, companies are required to develop and build their own internal economic capital management models around the same underlying assumptions, with catastrophe risk assessed by the same black box vendor models. Are we running the risk that in encouraging all companies to follow similar risk management practices, we are creating an inherent systemic risk which we cannot currently recognize, assess or control, ironically leading to a Black Swan scenario?
|This post was part of the special feature about Our Scariest Risks, published October 31, 2011. The feature also included these other risks:|