Change
Everything is changing. The world is more populated and wealthier. Increasingly, more people and businesses are residing and operating in areas vulnerable to disasters. The modern world, connected by information highways, transportation systems, and trade, is more networked, interconnected, and fragile. This connectivity has made the world smaller, but it has also exposed it to pandemics, financial contagion, new cybercrimes, disinformation, and the possibility of cyberwar.
The polycrisis model as a tool for policymakers
In January 2024, Cambridge University Press published a paper titled “Global Polycrisis: The Causal Mechanisms of Crisis Entanglement.” This paper was a collaborative effort among the Cascade Institute, the Potsdam Institute for Climate Impact Research, and the Stockholm Resilience Center, collectively known as “Cascade”. The importance of the ESIR’s and Cascade’s polycrisis definition and model is its utility in organizing policymakers’ historically uncorrelated and independent systems and the emerging risks (and opportunities) arising from such complex and interconnected systems into valuable and actionable intelligence. The Polycrisis Policymaker Conceptual Model (PPCM) is a global model that provides policymakers with insights into existential risks. The paper’s authors suggest a global polycrisis arises when one of the more fast-moving trigger events combines with slow-moving stresses to push a global system out of an established equilibrium into a volatile and harmful state of disequilibrium.[1] The Stress-Trigger Crisis Model (STC) is the core of Cascade’s framework, which depicts crises as the result of slow-moving stresses interacting with fast-moving trigger events to push a global system out of its established equilibrium and into a state of disequilibrium or a systemic crisis, that causes human harm.[2] In this model, a polycrisis emerges from the interplay of multiple systems and the activation of causes and effects that lead to harm. The focus is not on the complexity of the risks themselves but on the complexity of the system in which the risk develops [3].
The PPCM’s importance lies in its utility for organizing historically uncorrelated and independent systems, providing policymakers with valuable and actionable intelligence on the emerging risks and opportunities that arise from such complex and interconnected systems. The Polycrisis Policymaker Conceptual Model (PPCM) is a global model that provides policymakers with actionable intelligence on global catastrophic risks.
The insurance and reinsurance industry’s need for actionable intelligence
The PPCM is not intended for insurance or reinsurance risk managers or insurance or reinsurance product designers. However, insurers and reinsurers, on a different scale, deal with known, unknown, and emerging risks that arise out of the local, regional, national, and global complex, connected, and frequently mutually reinforcing systems every day. The risk ecosystems that insurers and reinsurers must understand constantly change. These changes are not an abstract academic exercise, as insurance and reinsurance buyers may have unexpected gaps in their protections. The obsolescence may also expose insurers and reinsurers to risks that are neither expected nor priced. Unfortunately, the history of the insurance and reinsurance business has had several intelligence failures where changes to the risk ecosystem were overlooked or ignored. There is an ongoing need for sound risk intelligence.
With insurers’ and reinsurers’ need for reasonable and actionable intelligence on emerging risks, emerging trends, complex and interconnected systems, and changes to the risk ecosystem, the PPCM is too valuable a tool not to adapt and use. Captive International reports that Pierre du Rostu, CEO of Axa’s Digital Commercial Platform, described a polycrisis at the 2024 FERMA Forum, where “all risks are completely intertwined.” Climate change, for example, may exacerbate geopolitical tensions, leading to cyberattacks that result in supply chain disruptions. The PPCM, with its focus on global catastrophes and existential risks, may be adapted to address such local and regional multiple-system crises that could coalesce into a substantial catastrophic event but not a global catastrophe. There also may be an opportunity to combine a modified polycrisis model with a model, such as those described by Charles Perrow, that focuses on individual risks or systems. This combination might provide an insurer or reinsurer with a more complete view of the risk ecosystem.
Individual systems or risks
The models, as described in Charles Perrow’s (Perrow) books Normal Accidents and The Next Catastrophe, focus on single systems. Cascade and Perrow focus on system complexity; however, unlike the PPCM, Perrow’s deterministic concept is based on individual systems or risks, as well as the concepts of specific system complexity and tight coupling. Perrow’s focus was on the internal dynamics within particular systems. In Normal Accidents, Perrow provides several examples of complex systems that are tightly coupled, such as nuclear power plants[4], chemical processing plants [5], modern aircraft [6], air traffic control, financial markets[7], health care organizations [8] and the national power grid.[9] Tightly coupled systems where small failures can cascade unpredictably cascade into catastrophes.
Innovation and change
Insurers and reinsurers rarely welcome surprises. Surprises are expensive, and they are intelligence failures that did not anticipate evolving risk ecosystems.
Guy Carpenter and Company Inc., in the 1960s, with the support of underwriters at Lloyds of London, created the Global Slip Catastrophe Reinsurance (GSCR) [10]. The GSCR was a revolution in reinsurance catastrophe protection welcomed by both insurers and reinsurers. GSCR, like the earlier Carpenter Plan, was a brilliant innovation. GSCR provided extensive coverage grants with very few exclusions. GSCR was attractive to reinsurance buyers as it offered comprehensive coverage for multiple lines of business, including United States casualty insurance. The casualty coverage in the GSCR (initially) was a sweetener to stabilize property catastrophe pricing.
However, the underwriters decided to offer casualty coverage on a 1950s understanding of the United States casualty risk ecosystem. At that time, injured parties faced a significant challenge in perfecting liability claims in the United States. Tort law, from an underwriting perspective, operated in a narrow framework. In the 1950s, the compensation for pain and suffering was severely limited. Second, there was no strict liability for dangerous products, which imposed a much higher burden of proof on injured consumers. Third, injured parties faced challenges related to privity. The traditional rule required that there had to be a contractual relationship between the injured party and the defendant. In other words, the injured party could sue the seller but not the manufacturer unless they prove negligence. There was also limited recognition of emotional distress claims and non-physical injuries. In 2000 inflation-adjusted numbers [11], the average successful claim was $10,000 or less from 1930 to 1960. In the 1960s, the average successful claim was between $100,000 and $130,000. Underwriters trained and accustomed to this risk ecosystem would be comfortable providing casualty coverage as part of the GSCR.
Unfortunately, this comfort was illusionary and the product of a lack of good intelligence. Cascade’s global polycrises model describes the impact of slow-moving stressors. The efforts of legal academics and plaintiff lawyers to modernize tort law in the United States are a classic example of a slow-moving stressor; it serves as a case study of how a risk ecosystem can evolve, resulting in substantial losses for insurers and reinsurers.
The incredibly influential American Law Institute’s (ALI) 1965 Restatement of the Law, Second, Torts, Section 402A (the “Restatement”) should not have come as a surprise.[12] This Restatement, although not law, serves as an instructive illustration of a slow-moving stressor that was part of a broader risk ecosystem that developed, expanded, and gained influence over time. This tort revolution took seventy-plus years, but eventually, there was a convergence of several independent slow-moving stressors, such as the emergence of a middle class, recognition of the uncompensated injury and damage resulting from industrial practices, dissatisfaction with the limitations of negligence and contract law, radical legal scholars, aggressive judiciary, and an increasingly sophisticated plaintiffs’ bar. This convergence created the conditions and political will for revolution in tort law. This Restatement [13] eliminated privity requirements, advanced the doctrine of strict liability, and recognized an independent cause of action for intentional inflection of severe emotional distress. Even though this tort law revolution took almost a century to materialize, insurers, reinsurers, and brokers were surprised as they struggled with waves of litigation and worked to reengineer their insurance policies and reinsurance catastrophe treaties. [14]
It all came to a boil in 1984. The asbestos crisis exploded. European reinsurers withdrew from the American market. Insurers struggled to meet capital adequacy requirements due to a lack of reinsurance support, as well as unexpected and unanticipated losses. Reinsurance structures, such as the GSCR, were not renewed or were radically restructured. Insurers went insolvent. The remaining insurers had to reduce limits and coverage or withdraw from specific lines of business. The shrinking supply of available insurance drove premiums upward. People, communities, firms, and doctors could not find insurance coverage. It was a mess. The problem was even worse for reinsurers. Lloyds of London underwriters lost billions of dollars [15]. These losses, in large part, stemmed from the United States casualty business, particularly asbestos-related losses. In 1995, Lloyd’s of London established Equitas [16] to handle the runoff of syndicate liabilities from 1992 and earlier years. This initiative was part of an effort to restructure Lloyd’s and eliminate the unlimited liability of Lloyd’s names, thereby facilitating the introduction of corporate capital into the Lloyd’s market.
The 1980s Liability Crisis was a massive intelligence failure that demonstrated how a single component of a risk ecosystem, such as the law, can radically change over time and function as both a slow-moving stressor and a fast-moving multiple crisis trigger. It was a global polycrisis and a local, regional, and national crisis.
Collaboration
In isolation and combination, new unforeseen systems and risk ecosystems emerge daily. Existing risk ecosystems may evolve and become increasingly complex and powerful. Risk ecosystems and their component systems may become obsolete, devolved, ineffective, or dangerous. The only constant is the need for vigilance and actionable intelligence. No single government, insurer, reinsurer, broker, actuary, modeler, researcher, legal scholar, university, or private corporation can manage this process alone, regardless of technological accomplishments. The intelligence work that supports ecosystem risk management on this scale is expensive, suggesting the need for collaboration. Collaboration is cheaper than being surprised.
Conclusion
A modified version of Cascade’s global polycrisis model incorporating a Perrow-like single-system model might help analyze slow-moving stressors and trigger crises on any scale. No one likes surprises.
About Cobblestone Consulting LLC
Cobblestone Consulting LLC provides specialized services focused on enhancing insurer operational efficiency, reinsurance risk management, emerging risk mitigation, educational programs, and litigation support for law firms. We focus on cost-effective problem-solving and knowledge transfer. Our mission is to help clients improve.
This article was first published in the ARIAS·U.S. Quarterly, 3rd Quarter 2025. Republished here with permission.
[1] https://cascadeinstitute.org/technical-paper/global-polycrisis-the-causal-mechanisms-of-crisis-entanglement/
[2] Michael Lawrence, Megan Shipman, Thomas Homer Dixon, 2024 Cascade Institute, Introduction to Polycrisis Analysis, page 2
[3] Lawrence M,Homer-Dixon T, Janzwood S,Rockstom J, Renn O, Donges JF (2024)Global Polycrisis: the causal mechanisms of entanglement, Global Sustainability, page 3, https://doi.org/10.1017/sus.2024.1
[4] Normal Accidents-Living with high risk technologies, Charles Perrow 1999 Princeton University Press, First Printing Basic Books 1984,Kindle edition page 15
[5] Ibid, page 101
[6] Ibid, page 123
[7] Ibid, page 384
[8] Ibid, page 387h
[9] The Next Catastrophe – Reducing our vulnerabilities to Natural, Industrial and Terrorism Disasters, Charles Perrow, 2007 Princeton University Press, page 211
[10] https://www.guycarp.com/company/100-years.html, 1960 slide
[11] https://pubs.aeaweb.org/doi/pdf/10.1257%2F0895330054048669?utm
[12] https://libguides.law.widener.edu/torts/restatements?utm
[13] https://news.wfu.edu/2009/03/31/evolving-tort-law
[14] https://digitalcommons.tourolaw.edu/cgi/viewcontent.cgi?article=1939&context=lawreview
[15] https://www.uniset.ca/lloydata/art/ref_case_lloyds.html?utm_source=perplexity[16] https://www.latimes.com/archives/la-xpm-1995-05-24-fi-5556-story.html?