3 ms·
You cannot "estimate" the probability of a catastrophic event, i.e. a Black Swan. All you can say is that it's possible, and over a long enough time period, thi
by AlbertCory 3y ago
You cannot "estimate" the probability of a catastrophic event, i.e. a Black Swan. All you can say is that it's possible, and over a long enough time period, things like that will happen. As well as things you never imagined.
- edmundsauto 3y agoIsn’t this a tautology? If you can estimate a specific event, it is a possibility that your worldview has to accommodate. By definition, black swans are things you didn’t think of.
- bvan 3y agoA catastrophe is not synonymous with a black swan event. Your friendly insurance company estimates the probability of catastrophic losses on a regular basis.
- AlbertCory 3y agoWith an "act of God" exclusion. They insure you for specific events. The probability of those can be calculated.
- RetroTechie 3y agoBut they can 'write uncovered checks' by insuring risks they can't cover: No / smaller catastrophes: do the math, cash the premiums, do the payouts. Big catastrophe: insurer would go under, but as long as it doesn't happen they can still cash the insurance premiums & everything is a-okay.
- AlbertCory 3y agoExactly. They can declare bankruptcy. Or they can refuse to cover it, so that the legislatures have to get involved. Implicitly, the government is covering the Black Swan events.