Scariest ERM Risk: Systemic Risk

The Scream, by Edvard Munch (1893)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:
Aerospace
Captive Insurance
China
D&O
Employee Benefits
Energy
Environmental Liability
ERM
Financial Services
FINEX
Global
Health Care
Middle East
Mining
Power
Real Estate
Reinsurance
Renewables
Supply Chain
Terrorism
Trade Credit

About James Vickers

James is the Chairman of Willis Re International & Specialty, where he is responsible for strategy and senior c…
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