In this turbulent times, where apparently everybody has so say something or has seen everything coming (key-sentence: it was just a matter of time, this would happen...), I have also something to say (but I did not see everything coming): According to a paper of LeRoy and Singell (1987): "Knight on Risk and Uncertainty" they state, that Knight in his 1921 "Risk, Uncertainty and Profit" made the distinction between risk and uncertainty due to the existence of insurance markets. Under a situation of risk, they exist, under uncertainty they do not.
The explanation for that, they find in Knights definition of profit as a residual. Insurable hazards are cost so they are not part of profit and do not affect it. Profit must be the reward for bearing uninsurable hazards. So as long as profit can only exist in situations of uncertainty, it follows that these situation must be identified with uninsurable hazards, which means that insurance markets lay down.
Coming back to present days and the nearly break-down of AIG, one of Americas biggest insurance companies, one could make the proposition that we have moved from a more or less risky to a more uncertain situation because of a collaps in the insurance market.
See: LeRoy, Stephen and Larry Singell (1987): Knight on Risk and Uncertainty. In: The Journal of Political Economy. Vol. 95 (2).
