The above line, from 1968’s Master Jack, came to mind as we surveyed our risk environment. Of course, in the realm of risk, situations may appear to change and new risks arise, but in reality much is the same, because the nature of risk bears a great resemblance to that of physics’ laws of energy conservation- risk may appear in different forms, but it is still risk; and it can and will harm you if you are unobservant and unprepared.
For example, could the Ebola outbreak in West Africa become a pandemic? Nothing new there. Pandemics are as old as humanity- just consider those from 1918/19, or mid-14th century Europe, dead in their tens and hundreds of millions from influenza and the plague. The difference today is that the rate of dispersion and speed of transmission may have increased.
Similarly, the risks from geopolitics may appear to mutate, but in many ways they are subject to the same factors that have had an impact on human events throughout recorded history- great power rivalries, religious intolerance and dogmatism, competition for scarce resources, clashing ideologies, megalomania and greed. The differences today are that Humanity now has the ability to destroy itself through nuclear weapons and that there are many more human beings competing for resources that, in certain areas, are becoming ever scarcer on a per capita basis- water, arable land, habitable environments. As for climate change…
And yet, we do live in a strange world now- a world in which central banks are trying actively to encourage the taking of risk through the maintenance of ultra-low interest rates and variations upon the theme of quantitative easing, while the paranoid amongst us keep looking for the next Minsky Moment and the collapse of asset values, as the investing herd stampedes for the exits, having been spooked by something that finally caught its members’ attention as “really bad”.; and one in which the substantial is increasingly replaced by the intangible in ways that make the consequences uncertain, because human behaviour may also be being changed.
At Awbury, we know how strange the world is, having seen the irrationality of regulators and the self-serving, incentive-addled behaviour of many of their supposed charges. We know that tipping-points exist; and that one has to assume that bad things can and will happen to the innocent and the unprepared. And we use such knowledge, experience and observation to try to design and craft products that adapt to our strange world and the needs of our clients; and protecting them from bad things happening to them, closely supported by our partner (re)insurers, who know a risk when they see one!
And now, back to our summer reading (of risk)…
-The Awbury Team