ABSTRACT
This being so, it is reasonable to question whether there is any
point i n m a k i n g sophisticated calculations of the no rma l quantifiable
risks when many of these highly significant and potential ly dangerous
factors cannot be handled i n this way. One answer to this question
wi th regard to unquantifiable risks is to organize adequate audit
and internal cont ro l wi th in insurance companies, supplemented by
effective publ ic supervision, inc lud ing aspects such as whether the
directors and managers are fit and proper persons to manage an
insurance company. If internal and external supervision is lax, no
amount of sophisticated model l ing can guarantee the safety of the
commitments. O n the other hand, supervision cannot and must not
take away from managers the responsibil i ty for good underwri t ing
and for cont ro l l ing claims and for managing changes i n p remium
rates to cope wi th inflation and wi th underwrit ing cycles. These factors
necessitate good financial management of reserves and adequate
solvency margins, inc luding, perhaps, equal izat ion reserves. Satis-
factory cont ro l can only be achieved by a combina t ion of technical
skills, good management and firm supervision.
