Our Scariest Capital Markets Risk – Waiting for the Perfect Time as an Excuse for the Status Quo

Scariest Risks

Scariest Risks

Voltaire’s “Dit que le mieux est l’ennemi du bien”* is a cliché well understood by most executives in reinsurance, finance, and asset management. They do not generally let market timing influence ordinary course decisions towards the status quo (e.g., do we buy less or more quota share relative to excess of loss reinsurance this year). Yet we see some of those very same executives biased towards picking the perfect time to make more transformational decisions.

Where compelling economics exist (e.g,. adding a hurricane cat bond to a reinsurance program for some insurers, making a value adding strategic acquisition for others), further waiting may improve the economics.

On the other hand the company loses the economic benefit during any delay and in addition the economics may deteriorate rather than improve . . . either is a scary prospect.

*Roughly translates to “the perfect is the enemy of the good”.

This post was part of the special feature about Our Scariest Risks, published October 29, 2012. The feature also included these other risks:

About Bill Dubinsky

Bill Dubinsky is Managing Director for Willis Capital Markets & Advisory, where he heads the WCMA insurance-lin…
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