I agree with you about the cyclicity of concentration on risk issues , I'm not sure if it's "not required" after a crisis - just because crises have in the past been rather discrete events does not mean that this will always be the case - certainly the recently observed (it has long been the case but not often commented upon in the pages of the FT amongst others) notion that retail banks are now little more than leveraged property investors seems to entail significant risk retention - it might also have implications for government control of property prices - e.g. I live in Germany and government control of rental increases has had a marked effect on stopping property bubbles ever surfacing.
Solvency II was on the table long before the crisis and as many reserving actuaries will tell you (off the record of course) , anything that strengthens their hand when persuading boards as to the dangers of under-reserving is welcome - witness the ridiculous cyclical nature of the insurance cycle and in particular the profitability of reinsurers - the most recent sigma report being a cast-iron demonstration of that.
In my view the insurance industry has suffered heavily from poor corporate governance , although I consider myself to be ideologically close to laissez faire economics , the continued and long term failure of successive insurance management to tackle the cycles effectively suggests that such an approach may not always yield the best results , contrary to what Adam Smith suggests.
To summarise : if greater power is invested in actuarial and risk management functions then there is at least a greater opportunity for long standing problems facing financial industries to be addressed - the challenge is to maintain that power in the medium to long term.
Last edited by a moderator: Jun 19, 2008