Yeah, no disagreement with those points. (Although now thinking more about the use of insurance underwriting there may be a problem getting large enough insurance. For example, in some areas there have been home insurance companies that went bankrupt after major natural disasters and didn’t have enough money to pay everything out. One could see similar problems occurring when one has potential loss in the multi-billion dollar range.)
One of the oldest reinsurers originally had unlimited liability for members. I think that provides much more effective oversight of risk allocation than any regulation.
I think that provides much more effective oversight of risk allocation than any regulation.
No, it didn’t. Did you miss the part where Lloyds imploded, and the unlimited liability destroyed scores of lives (and caused multiple suicides)? The ‘reinsurance spiral’ certainly was not effective oversight. Even counting the Names’ net worth, Lloyds had less reserves and greater risk exposure than regular corporate insurance giants that it competed with, like Swiss Re and Munich Re.
EDIT: It occurs to me that the obvious rebuttal is that Lloyds was quite profitable for a century or two, and so we shouldn’t hold the asbestos disaster against it. But it seems to me that any fool can capably insure against risks that eventuate every month or year; high quality risk management is known from how well the extremely rare events are handled.
Their liability is still limited by the laws regarding personal bankruptcy. You can’t pay back money you don’t have. (In the old days, there was debtor’s prison, but that really doesn’t help anyone.)
Yeah, no disagreement with those points. (Although now thinking more about the use of insurance underwriting there may be a problem getting large enough insurance. For example, in some areas there have been home insurance companies that went bankrupt after major natural disasters and didn’t have enough money to pay everything out. One could see similar problems occurring when one has potential loss in the multi-billion dollar range.)
Reinsurance.
Good point, although again, would then push the regulation back one level to make sure that the insurance companies risk was appropriately allocated.
One of the oldest reinsurers originally had unlimited liability for members. I think that provides much more effective oversight of risk allocation than any regulation.
No, it didn’t. Did you miss the part where Lloyds imploded, and the unlimited liability destroyed scores of lives (and caused multiple suicides)? The ‘reinsurance spiral’ certainly was not effective oversight. Even counting the Names’ net worth, Lloyds had less reserves and greater risk exposure than regular corporate insurance giants that it competed with, like Swiss Re and Munich Re.
EDIT: It occurs to me that the obvious rebuttal is that Lloyds was quite profitable for a century or two, and so we shouldn’t hold the asbestos disaster against it. But it seems to me that any fool can capably insure against risks that eventuate every month or year; high quality risk management is known from how well the extremely rare events are handled.
Issue Status: Closed.
Reason: As Designed.
Their liability is still limited by the laws regarding personal bankruptcy. You can’t pay back money you don’t have. (In the old days, there was debtor’s prison, but that really doesn’t help anyone.)