For those of us who have some knowledge of orders of chivalry (republicans look away now!), there is an old joke about the true meaning of two of the designations of the British Order of St. Michael and St. George- “KCMG” means “Kindly Call Me God”; and “GCMG” (the most senior rank below the Sovereign) means “God Calls Me God”.
So, you may well ask, what has this to do with our world of Financial Catastrophe, or FinCAT? For a start, the term “Act of God” is not exactly unknown to insurance underwriters; yet, on the other hand, we at Awbury believe firmly that God has nothing to do with the risks we analyze; and that the policies we structure and issue are based upon identifying and understanding all the factors and data that may affect an outcome or cause an adverse event.
That said, we certainly do not believe we are omniscient or infallible; and definitely have no “God Complex”! We know that our world is a volatile and uncertain place; and that calculations of risk vs. reward are ones of probability, not certainty.
What concerns us is that we do believe that there are those among us who are beginning to believe that they “know better”; are not subject to the same rules and constraints as “mere mortals”; and have a “divine right” to whatever advantage they can accrue.
You may think that this could be the case with certain bureaucrats within, say, the US NSA of the UK’s GCHQ; and clearly governments, republican, monarchical or tyrannical, often believe that they can act as they wish because they have the coercive power of the State behind them (until they do not…), democratic accountability be damned.
Yet, in our data-driven, relentlessly “on” world, could it be that the new class of Masters of the Universe (they are still culturally and genetically mainly male) are to be found within a number of dominant technological and financial franchises? We will mention no names, because we do not wish to target any entity in particular- but you know who they are- and they probably know it too!
Our point is that our industry depends upon the quality, accuracy and reliability of data; data we can verify and trust; and whose sources may not be disinterested, but whose motivations and weaknesses we can take into account. These sources are increasingly concentrated so far as “raw” data are concerned, even tho’ there are countless businesses that generate products and profits derived from those data. However, what if the data are manipulated or distorted, because those who provide them have motives that are hidden? Governments have a long history of doing such things (Argentine inflation statistics anyone?), but the increasingly dominant for-profit providers remain generally untested- and the distortions would not have to be material to have an impact. For example, any life actuary knows how a relatively small change in mortality assumptions can generate a significantly different outcome.
Therefore, it behooves us all to retain a skeptical disposition; and not to believe that those providing essential data are necessarily idealistic and altruistic. Some may have begun with that outlook; but power and wealth have a tendency to corrupt…
-The Awbury Team