Ep20 "Risk and the Fundamental Tradeoff of Corporate Finance"
All Else Equal: Making Better Decisions
00:00
The Benefits of Mutual Insurance for Earthquake Insurance
The risk in the mutual insurance company with earthquakes is almost exactly the same as if I insured myself. It's not an individual house it will to burn down. And we still have this, what we call systematic risk there. The earthquake insurance company has to put up enough capital so that when the earthquake hits, there's enough money in the company to pay off everybody.
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