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I used to have a reinsurance company as a client. For those unfamiliar, that’s an insurance company that sells insurance to insurance companies. Example: You bu

• sharkweek 4y ago
  I had a friend who dabbled in rare collectables and he told me you can almost always find a broker willing to insure, quite literally, anything.
  • FireBeyond 4y ago
    Lloyds of London are quite open and proud of being willing to insure anything - they've insured singer's voices, model's legs, all manner of things.
    • Slartie 4y ago
      Are they insuring densely populated countries against the consequences of disastrous nuclear reactor accidents?
      • michaelt 4y ago
        I suspect even a company that claims to 'insure anything' would balk at things needing a $200 billion payout.
        • Sebb767 4y ago
          Well, there's always the strategy of 'take the payouts, go insolvent in case the event really happens'. But, on the other hand, such a high possible payout would probably come with insane premiums that might make it viable (for the insurance, not the country).
        • yardstick 4y ago
          Depends on the premium they would charge.
      • throwaway2037 4y ago
        Are you thinking of Belgium, Korea, Taiwan, or Japan?
      • woutifier 4y ago
        For nuclear reactor incidents there are reinsurance pools. A collective of insurance companies. For example the nuclear reactor in Borssele, The Netherlands, is insured backed by 26 of such collectives (one national, and 25 foreign collectives) together they consist of over 300 individual insurance companies. This particular (small) reactor is insured for liability up to 1.2 billion euro.
        • mschuster91 4y ago
          The problem is, the followup costs for a nuclear reactor disaster can easily reach multiple trillions of euros - and no plant is adequately insured. In Germany, they did the maths [1] in the wake of the 2011 Fukushima disaster and found out that decent insurance would cost 72 billion euros a year in premiums - a move that would raise electricity prices from 20 ct/kWh to 4 euros/kWh. We have been ignoring that massive risk in favor of "cheap" electricity for decades, and every time something happened, in the end the taxpayers had to cover the bill. Nuclear simply is financially unviable once externalities are properly accounted for. Add to that cost and time overruns in projects, the still unsolved questions of where to dump the waste, of nuclear weapon fuel proliferation... and just forget about fission-based nuclear projects, please. [1] https://www.manager-magazin.de/finanzen/versicherungen/a-761954.html https://www.manager-magazin.de/finanzen/versicherungen/a-761...
          • Chris2048 4y ago
            Given Chernobyl cost about around 235 billion USD to cleanup - What constitutes "decent insurance"? How much are they expecting to pay out?
            • mschuster91 4y ago
              It's not just the direct cleanup costs - the number goes up extremely hard if you also attempt to account for externalized costs that are rarely grouped together: - loss of life and the economic productivity of people who died early (not just the liquidators, but also everyone who got radiation damage!) - loss of sellability of goods - to this day, Bavarian shroom collectors and hunters have to check fungi or wild animals for radiation, and in particularly bad years up to 70% of wild pigs have to be discarded due to irradiation [1]. That's an economic loss for the hunters and for all subsequent economic activities (butchers, restaurants). - healthcare cost associated with dealing with the fallout - cancers are the most expensive illnesses known to mankind - loss of quality of life in those who were displaced by the Chernobyl and Fukushima disasters, additionally also the cost of relocating and the loss of opportunities, social networks etc. caused by the relocating - loss of economic potential that could have been realized in the area around Chernobyl, had it not been contaminated [1] https://www.welt.de/wissenschaft/article230648425/35-Jahre-nach-Tschernobyl-Ungeniessbares-Wildfleisch-in-Bayern.html https://www.welt.de/wissenschaft/article230648425/35-Jahre-n...
    • fmdragon 4y ago
      They were known in the 90's for insuring pro wrestlers bodies if they were injured to the point that they could no longer perform. It was pretty common to hear about a wrestler retiring with a "Lloyds settlement".
  • donthellbanme 4y ago
    Yes you can. And I it's great for the wealthy. Forcing insurance on poor people is not right. The poor have a tough enough time just keeping their head above homelessness. I have been required to pay for automotive insurance in California for approximately 20 years. (In CA mandatory insurance was required, but not mandatory forever. There is a weird legal difference. I white knuckled my college years while driving. I got lucky except onetime. A wealthy women slammed into me, and the minute she, or actually her lawyer husband, found out I didn't have insurance, I was putty in their hands. I paid $1000 for an 1982 Volvo bumper. It was the last of my student loan, but they had me. A call to DMV and I wouldn't be able to commute to my school.) Every year if I want to drive my old truck I needed to come up with $600.00 plus. Even with a perfect record since 15.5 years of age. I only can afford the minimum. I never made much money even as college graduate. I believe it's 15-30-5. (this means if slam into you and you are a vegetable; you will get $15,000 for injuries, and $5,000 for your Tesla. Great payday? If you have money you can go after my assets.). My point is it's not enough if we are being honest. The insurance industry loves these minimum mandates because they make billions off the poor, and middleclass. It's no wonder the insurance industry is always the number #1 Lobby group on every political fund. It's a racket, and I believe the bigger boys are colluding on rates, but can't prove it. "Buy the per mile insurance dude--you low income loser!" (1. Work out the low income insurance on a yearly basis, and it's not copasetic. Plus my old Toyota does not have a computer other than a rudimentary computer that was suspose to control the main plunger in the naturally aspirated carb that never really worked. Meaning there's no computer to plug a mileage indication in. So there's no per mile insurance I can get.) My point is mandated insurance is kind of a racket like this two year mandated Smog check, especially on vechicles that that we only use a few times per year, or under 1000 miles/per year. Rant Over.
    • justinator 4y ago
      Car insurance seems like a good thing, I wonder why it's not subsidized for the very poor.
      • argonaut 4y ago
        In California, at least, this exists: https://www.mylowcostauto.com/ https://www.mylowcostauto.com/
  • eru 4y ago
    If you are willing to pay my inflated premiums, I am happy to insure anything, too.
  • NoboruWataya 4y ago
    It's a bit of a mantra within the insurance industry that there is no bad risk, only a bad price.
• jimt1234 4y ago
  Reminds me of the movie "The Big Short", specifically the "Brownfield Capital" subplot. I'd love to hear some of these stories. I've never had any visibility into the world of insurance, but it's always kinda fascinated me.
  • a4isms 4y ago
    Story #1: Young man riding a motorcycle, accident, suffers catastrophic but non-fatal head trauma. Problem 1, part I: Requires assisted living for the rest of his life. Problem 2: He has the hormones of a young man, the muscles of a young man, but the intellectual capacity and emotional regulation of a baby. Requires a very specific type of assisted living care that can handle violent behaviour and possible sexual assault. Problem 1, part II: His lifespan is estimated to be longer than usual, because he can no longer do things like ride motorcycles, smoke cigarettes, or have a stressful job. Put those things together, and the estimated total payout was well into eight figures. The motorcycle insurance company was on the hook for his care, and they had insured their portfolio, so everything over their $1,000,000 deductible (or whatever it was) fell on the reinsurance company.
    • a4isms 4y ago
      Story #2 (also, 3, 4, 5, and so on, it’s a common thing for reinsurance companies): Flood happens in a place where floods are uncommon, e.g. Tornado hitting Barrie, Ontario. Home insurance companies are hit with hundreds, even thousands of claims. Most are not in the eight figures, but insurance companies don’t just buy insurance against exceptional claims, they also buy insurance against single events like floods triggering unusually large numbers of claims that would otherwise fall below the deductible. This is what reinsurance is for, so the interesting bit to me is what my client related: It seems that a statistically improbable number of people just happened to have all their furniture in the basement while they were painting their house or some such, and it all got ruined, so the insurer is on the hook for replacing furniture that wouldn’t normally be in the basement (we are not talking about people with furniture in finished basements, we are talking about people claiming they were storing furniture in their basements). Normally they have the bandwidth to investigate such wild claims and reject most of them, but when they all come at once, the insurance company looks very bad if they tell everyone to wait a month or three while they work through a backlog of investigations. So they lay off their losses on the reinsurance ompany.
• version_five 4y ago
  When the Japan Olympics were cancelled in 2020 I read that there was actually some kind of "Olympics cancellation insurace" policy that paid out over it, potentially hundreds of millions. I'll see if I can find it See here: https://www.reuters.com/article/us-olympics-insurance/insurers-face-mind-blowingly-large-loss-if-olympics-cancelled-idUSKBN29W1OL https://www.reuters.com/article/us-olympics-insurance/insure... The IOC had 800 Million insurance and overall was 2-3 Billion. It would be really interesting to understand how to price an 800 Million Olymoic insurace policy
  • johannes1234321 4y ago
    in Germany there were quite some lefal battles around cancslling of Oktoberfest. If I didn't miss an uodate on that itnwas concluded that the 2020 Oktoberfest wasn't "cancelled" but it wasn't announced innthebfirst place, as usually the city councils votes for helding an Oktoberfest in spring while there isn't a permanent rule or similar about it. Thus insurances covering "cancelling" didn't have to pay.
    • deleted 4y ago
      [deleted]
    • jahnu 4y ago
      Excuse me sir, but have you been drinking?
      • zionic 4y ago
        Heh, that reminds me: Officer: Sir, how high are you? Dude: No officer, it’s high how are you
      • gerdesj 4y ago
        lefal is a perfectly cromulent word and nothing to do with f and g being quite close on a keyboard. I am personally, barely, three sheets to the wind - I've only guzzled two bottles of red!
      • lifeisstillgood 4y ago
• css 4y ago
  In this vein, one of my favorite financial vehicles is a catastrophe bond[0]. They are essentially short term debt instruments that pay a coupon normally, but in the event of a specified disaster, forgive the principal (thus removing the liability from the bond issuer's balance sheet). [0]: https://en.wikipedia.org/wiki/Catastrophe_bond https://en.wikipedia.org/wiki/Catastrophe_bond
  • JumpCrisscross 4y ago
    > in the event of a specified disaster, forgive the principal Cat bonds are fascinating. What you describe is one of many structures. In essence, bank loans are to bond markets as reinsurers are to cat bonds.
    • pmoriarty 4y ago
      "In essence, bank loans are to bond markets as reinsurers are to cat bonds." I'd love to hear someone elaborate on this, as I don't understand.
      • eru 4y ago
        Economically speaking, (bank) loans and bonds are almost the same thing. There's a bit of a legal difference. And bonds are expected to be traded relatively easily, but your creditor selling your loan to someone else is not quite as common. A re-insurer is someone who insures insurance companies. Many insurance contracts for you as an individual have you pay for the first few (thousand..) dollars of damage, and the insurance companies covers everything afterwards. Of that liability, insurance companies cover the first few (million) dollars of damage, and often pass on the excess liability afterwards to yet another specialised company. The re-insurer. Catastrophe bonds are a way for bond investors to take the liability that would normally go to re-insurers. Of course, in return for taking on some liability, they get paid. Just like you pay your insurance company a premium.
  • dan-robertson 4y ago
    The typical point of a hurricane bond is that it tends not to correlate with other investments so much. A reinsurer is going to need a lot of cash if a hurricane hits but the rest of the stock market likely won’t be very effected. If you’re a pension fund it reduces risk because the stock market going down is unlikely to affect your hurricane bonds and a hurricane is unlikely to affect your regular bonds/equities. However sometimes they are correlated. If you’re the WHO you might issue cat bonds that don’t pay out the principal if there’s a pandemic, and then you can use these to help surprise the next Ebola outbreak that affects some poor countries a lot but global markets little. But then if you have a global pandemic and everything is shut down, the pandemic bonds still keep the principal but the equity markets also go down a lot, which is not what the typical investor in those bonds would prefer.
• somedude895 4y ago
  I feel like someone deep into reinsurance could probably write a pretty good book or two.
• bkfunk 4y ago
  On Mythbusters, every now and then they would say something like "We would like to do X [e.g. something crazy like jump out of a plane with a duct tape parachute], but our insurance company wouldn't let us." I've always how that worked. Like, who is the employee at the insurance company who takes that call, and how do they decide what's just too risky, when there can't be much historical data on risk?
  • dwighttk 4y ago
    An insurance company will always say yes (if you can find that company) it was probably just outside of the show’s budget to pay the premium.
    • gridspy 4y ago
      Most likely the management would prefer the hosts didn't hurt themselves, so took the hint from the insurance company when a show plan got too dangerous.
  • mrandish 4y ago
    > how do they decide what's just too risky The question that's asked is "would XYZ claim be covered under the terms of our current policy". Usually the best answer I've been able to get is "probably so". The unique challenge in the case of an intentionally planned dangerous stunt is that most such policies are intended to cover "claims of negligence related accidental liability." If you planned to do something you knew had a high likelihood of being dangerous, that's not an "accident." Many such policies have specific limitations, stipulations and requirements to remain in force. For example, purchasing a liability insurance rider to cover a large corporate party may have limitations like limiting the number of people, stipulations like all the bartenders must have training on not serving inebriated guests and requirements such as having hired paramedics present. When you file a large claim on such an insurance policy, they will check that you were in full compliance with all the policy requirements before paying out. Source: I know an attorney who works in a law firm specializing in policy holders suing their own insurance company when they refuse a claim. I'm sure there are good insurance companies and bad but based on the stories I've heard you definitely want to make sure you're in compliance under any policy you're substantially relying on.
• withinboredom 4y ago
  I threw up in a sink at 1am (drunk) and left the water running full-stop, then went to sleep. It flooded the room, then went down the walls to the floor below, and cascaded like a Champaign Waterfall until it reached the offices in the basement where it destroyed servers and computers. That was the single time in my life I’ve ever, ever been so glad for liability insurance in my life. They covered everything. The hotel had to repaint and replace walls, servers, furniture, carpet, paintings, etc. Always get liability insurance riders on your home/rental insurance. It’s usually only a few extra bucks a month. Totally worth it in the event something like a sink overflow fails to stop a sink from overflowing while you are asleep. Anyway, I learned later that my little catastrophe coincided with a number of other little catastrophes which caused them to need to make a claim on their reinsurance company.
  • ladon86 4y ago
    Rock stars throwing TVs out of windows? Psssh. It's not a _real_ party unless you trash the whole server room!
    • mistrial9 4y ago
      bikers don't get invited back, however
  • danachow 4y ago
    Interesting that your liability insurance covered everything without question since there are a few obvious points of fault/negligence with the hotel (if a stray drunk patron can destroy their IT equipment, somebody fucked up, not to mention how a sink should generally not overflow from just being left on.
    • xmprt 4y ago
      When people say their "liability insurance covered" something it probably means the insurance also fought whoever they could so that they had to pay as little as possible. In this case, it's possible they went after the hotel for negligence as well.
• Esther432q 4y ago
• pmoriarty 4y ago
  A reinsurer would, of course, be crazy not to themselves be insured. So there must be companies that insure reinsurers, and then companies which insure companies which insure reinsurers. How deep does this rabbit hole go?
  • zeckalpha 4y ago
    It can be circular rather than nested. You may reinsure a peer company’s auto policies while they reinsure your home policies.
    • pmoriarty 4y ago
      But that's not really circular, is it? If they have to pay out on their reinsurance of your home policies the fact that you've reinsured their auto policies does not help them. Someone has to insure their reinsurance of your home policies, don't they?
  • huffmsa 4y ago
    You've described part of the 2008 financial crisis.
    • ineedasername 4y ago
      Pretty much what I was thinking. A number of seemingly uncorrelated risk that, scratching the surface, turn out to be highly correlated.
  • throwaway2037 4y ago
    I assume re-insurers use Lloyd's of London to split/sell very large risks. This is similar to syndicate loans, where a group of banks agree to split a single very large loan for huge construction projects. Although, these days, syndicate loans are much less popular than directly issuing debt via capital markets (if possible).
  • zie 4y ago
    Usually there are a few deep players Berkshire Hathaway(who happens to own a reinsurance business or two) has about $150 billion in cash just laying around, so they can pretty much insure anything they want and backstop it themselves. But for those without such a deep bench, they, like other commenters mentioned do a round robin sort of thing.
• soheil 4y ago
  Reinsurance business is a black swan [0] in the negative direction. [0] https://en.wikipedia.org/wiki/Black_swan_theory https://en.wikipedia.org/wiki/Black_swan_theory
• seanp2k2 4y ago
  Why does insurance as a business feel like legalized gambling? “I’ll give you 1000:1 odds that you won’t crash your car” “I think that person will win that bet and I’ll give you 100:1 odds”.
  • rocketbop 4y ago
    In general insurance is designed to contain or negate your loss, but not to allow you to profit, so in that respect is different to gambling.
    • ff317 4y ago
      Yeah but what about life insurance? It's not the deceased who gets the payout, it's their survivors. It's a real grey area ethically, as you can think of it as the survivors taking a bet on whether a family member will die soon, and profiting off of winning that bet. You could argue that the dead person approved and paid for it, but that's not always clearly the case. Some whole-life policies carry cash value and are an investment vehicle as well, so you can potentially make money on them surviving as well. This seems ethically-better, but most life insurance is term life that doesn't have this investment upside.
  • eru 4y ago
    Because economically and mathematically insurance and betting is the same. It's just that morally we treat insurance differently; and society has developed some moral and ethical rules around this topic. But because the mathematical structures are so similar, you can guess that the moral rules have lots of grey areas. (Similar for financial derivatives. Eg farmers use wheat futures to lock in the prices for next year's harvest today. Speculators use the same futures to 'gamble' on prices.)
  • Linosaurus 4y ago
    > Why does insurance as a business feel like legalized gambling? The mathematics are similar from the ensurer/casino side. However: 1. The happiness impact of losing 5x your net worth (house burnt down, eternal debt) is likely much bigger than gaining it. 2. It's harder to repeat sell insurance to someone until they are broke, compared to a slot machine.
• wazoox 4y ago
  Back in the 70s one of my mother's friend had his car to fail on a level crossing. A train arrived, crushed the car, the locomotive derailed, fell into the river, destroying the railway bridge over the river, then the following wagons derailed and fell into the river too (fortunately it was a freight train so nobody was killed). The cost was mind-boggling, millions upon millions. It nearly bankrupt his insurance company.