When the music stops

Assessing the three largest finance crises in recent history, Ree Chen, David Chen and Susan Siew look at their common themes, and lessons to be drawn.

In July 2007, Chuck Prince, then CEO of Citigroup, told the Financial Times: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We are still dancing.” We, of course, know that the music stopped when the global financial crisis hit shortly after Prince gave his famous quote.

Since the implementation of Solvency II, much of the insurance and pension industries’ focus has been on capital adequacy. Liquidity risk management came into the spotlight following the impacts of the 2020 Covid market shock and September 2022’s mini-budget on pension funds. Here, we reflect on the three main financial and liquidity crises of recent UK history to draw key lessons for insurers and wider market participants. We have focused on the impact sustained by the UK market, although the lessons can be interpreted in a wider context.

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