Umm, no

Now Dominique Strauss-Kahn, who runs the IMF, has suggested an insurance fund paid for by banks to mitigate the risks they create. It echoes precisely the position we set out in The Sunday Telegraph Business comment last weekend when we said: \”In the normal course of events, however, if we accept that it is nigh-on certain something bad is going to happen, we try and insure ourselves to compensate for its effects.

That is assurance, not insurance.

Insurance is a pooling of unlikely but catastrophic risks: think house fire insurance, thrid party car insurance against crillping someone and facing medical bills for 50 years, getting some horrible and hugely expensive to treat form of cancer, death in a particular time scale.

Assurance is a method of saving up for something that is likely but not certain to happen: burial insurance (you might be lost at sea, after all) death (you might be carried to heaven on a fiery chariot, like Enoch) and so on.

If we\’re all but certain that a financial crisis will happen in the future (and I\’m certainly convinced that boom and bust *is* capitalism) and we want to store up resources in the good times to use then this is assurance.

This isn\’t just quibbling over language: the difference between assurance and insurance makes a difference to how you raise money, how much you raise and where you park it once you\’ve raised it.

2 thoughts on “Umm, no”

  1. save “what” for the terrible future
    green chits??
    aluminum bars
    what ever you save will be expensive to buy and store…
    and will be cheap when you sell it..

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