Delusions of Competence

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The examination of the Lloyd's of London crisis reveals how rapid structural changes nearly dismantled the historic insurance market. Unlike typical financial service collapses, this situation stemmed from a blend of catastrophic losses and poor governance, compounded by a public and political misdiagnosis. The author employs insights from behavioral economics to highlight the role of arrogance and entrenched beliefs in self-regulation, leading to ineffective reforms. This analysis underscores the critical need for transparency and accountability in financial institutions, making it valuable for scholars and students across various disciplines.