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A catastrophe is not synonymous with a black swan event. Your friendly insurance company estimates the probability of catastrophic losses on a regular basis.
by bvan 3y ago
A 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.