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Err, a big chunk of their bottom-line comes from reinvesting the float, or just re-insuring and taking the spread.
by defo_nonconvex 9y ago
Err, a big chunk of their bottom-line comes from reinvesting the float, or just re-insuring and taking the spread.
- akhatri_aus 9y agoTo do this you can only make money if the insurance is priced at more than the chance of it happening. Or the reinsurer wouldn't be able to offer any insurance either, & the float wouldn't exist because it would be paid back in claims. Insurance runs on the same premise of making money a casino does. If there was no casino edge, there would be no cash for the casino 'float' back into bets.
- defo_nonconvex 9y agoGiven a market in a steady state, as long as your (return+premium) rate is higher than your expected payout, you're still ok. So your premium-expected_payout could be negative and you could hopefully still keep the lights on, no?