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The problem with re-insuring is it's not one thing and its not the other. The advantage of self-insurance is diminished, and the advantage of conventional insur
by lutusp 13y ago
The problem with re-insuring is it's not one thing and its not the other. The advantage of self-insurance is diminished, and the advantage of conventional insurance is diminished also.
> it would seem responsible for a self-insurer to reinsure.
Reinsuring is sort of like being married, and not being married, at once. Many people think that sounds pretty cool -- until they try it.
- fiatmoney 13y agoReinsurance policies can be pretty bespoke; you could for instance get a policy that only covers you in the event that a tornado hits corporate HQ (=> driving corporate revenues down and healthcare costs up at the same time), or individual payments above a certain amount, or N% of aggregate claims above a certain level. You still preserve most of the benefits of self-insuring while protecting yourself against outliers, in the same way that you come out ahead if you skip insuring the loss of your refrigerator, but do insure the loss of your house. The biggest issue is the principal-agent problem - it costs some amount to insure against once-every-20-year claims, and by that time the CEO is likely to be retired, so why buy the coverage? That's one of the reasons why insurance companies per se are highly regulated.