The first major stock-market crash associated with the introduction of computerized portfolio insurance occurred in 1987.
The Black Monday crash of 19 October 1987 happened after years of rising share prices and increasing use of computer-assisted trading strategies. Portfolio insurance was designed to reduce losses by selling equity futures as markets declined, but many similar strategies could generate selling at the same time.
As prices fell, automated orders and reduced willingness by market makers to provide liquidity contributed to a feedback loop. The Dow Jones Industrial Average lost 22.6 percent in one session, while other markets recorded severe declines.
Portfolio insurance was not the only cause. Economic concerns, valuation levels, interest rates, trade tensions, and market structure also mattered. The 1987 experience helped motivate later reforms, including coordinated trading halts known as circuit breakers.