Risk Allocation Quotes

The trade of insurance gives great security to the fortunes of private people, and by dividing among a great many that loss which would ruin an individual, makes it fall light and easy upon the whole society.

Diversifying sufficiently among uncorrelated risks can reduce portfolio risk toward zero. But financial engineers should know that's not true of a portfolio of correlated risks.

I think that's something that investment banks have worried about for a long time and are continuing to worry about, but it's not an easy solution when you have lots of people betting the company's money, how do you really allocate those risks? How do you make sure that the people that take the risks are feeling the risks in an appropriate kind of fashion?

What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so.

Having just one insurance provider for all flood risk in the entire country makes no sense.

Once we admit that the public sector takes an immense amount of risk along the entire innovation chain, it becomes crucial to find ways to share both risks and rewards.