Canada's Black Swans

While reading the April 2008 issue of Reinsurance recently, the author came across a brief article by the editor, Mark Geoghegan, on a book by Nassim Nicholas Taleb called The Black Swan. If you are wondering what a black swan is in this context, he will quote directly from the inside dust cover of the book: A Black Swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, people concoct an explanation that makes it appear less random, and more predictable, than it was. Although the essence of a black swan is its unpredictability, he feels people are facing future black swans in Canada due to the way they carry on their business. For example, in Canada they give "Guaranteed Replacement Cost" on homeowner contracts. Since there will continually be unpredictable events or black swans, people should not think they can foresee everything with their current risk models.