"The proper role of the government, like the proper role of the advice-book parent, is to set the stage. The stage should give full rein to the creativity of capitalism. But it should also countervail the excesses that occur because of our animal spirits."
Not my words, but the key phrases in a famous paper co-authored by two Nobel prize winners, George Akerlof and Robert Shiller.
These are words with which, surely, everyone in our market can agree.
There's nothing wrong with government writing the rules and making sure that fair play ensues.
In footballing terms it's fine when they mark out the pitch, set up the goalposts, start refereeing the game and leave us to get on with it.
The most common problem we as an industry have is when halfway through a difficult game, usually when we are losing quite badly, a government decides to step out of its referee's kit and take to the field of play for the opposing team.
This happened in Florida in 2006 when over $10bn of premiums were sucked out of the property cat reinsurance market by the actions of Florida's populist governor, Charlie Crist, after hurricanes Katrina, Rita and Wilma forced reinsurers to seek payback and handed politicians an easy way of buying popularity.
The other regularly occurring problem is when government decides not to let us play at all and gets straight into the business of subsidy.
Flood and crop insurance are the most common offenders. Flood, because for generations politicians have known that making home ownership affordable is a key electoral issue, and crop because securing food supply can be a matter of national security as well as one with a particularly powerful lobby.
Back to the football field analogy, in these instances the game is effectively cancelled as anyone foolish enough to show up to the ground is guaranteed to lose money.
In liability classes we also undertake a constant dance with our governments. The construction of liability policies means that they can always be reinterpreted and reopened in the light of new knowledge.
However, it is ultimately down to governments whether they apply this new knowledge retrospectively. As an industry predicated on the rule of law we are ultimately in the legislators' hands.
When not fixing a game in progress or retrospectively changing the results of old games, governments also often make the mistake of looking upon our sector as just another utility.
But unlike utilities that, because of obvious barriers to entry, naturally tend towards becoming either state- or privately-owned monopolies, insurance is a virtual commodity that is highly transferable and is naturally conducive to high levels of competition.
It really is always cheaper and better for governments to stand aside and to let a free insurance market get to work.
The great news for us is that as global government finances come under increased pressure many of the most obviously inefficient state-backed markets are likely to seek a return to the private sector.
The only drawback will be that decades of state subsidy have created distortions. For instance, many existing homes would never have been built close to a low-lying hurricane-exposed coast or on a flood plain had a genuinely free market been allowed to disincentivise their construction through realistic pricing.
But that is a political problem, not an insurance one.
From our perspective, the sooner the playing field is cleared, the better. Game on!
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