[donavanm]

A mismatch in risk and term duration. In the worst case its short term cashflow, converted to profit ona regular basis. the huge tail risk is of a longer (likely) term. On a normal year reinsurance pays out expected losses, the primary insurer keeps their couple of percent margin, business continues. Eventually their optimistic/naive/malign actuarial numbers are shown up, reinsurance doesnt cover it, huge losses, bankruptcy, the profits are long gone and paid out, remaining share and debt holders are wiped out. Their insured customers are covered by the state after much bad pr, or just not covered.

[0cf8612b2e1e]

Duh, I suppose this is obvious. Just take inflated pay as long as the good times last. I was trying to envision some grand huge payout, but methodical grind until apocalypse is fine too.