Comment by bruce511
The absolute value is only meaningful when compared to the amount of capital invested.
Its also only meaningful when measured over a long period which takes good years and bad years into account.
The absolute value is only meaningful when compared to the amount of capital invested.
Its also only meaningful when measured over a long period which takes good years and bad years into account.
Also, when margins are slim, a major event (like a series of wildfires in one of the biggest cities in the US) can wipe out those profits. A responsible insurer can withstand one bad year. But if those major events start happening with more frequency, then one bad year becomes a series of bad years. Reinsurance premiums for the insurer go up, meaning that taking on risk is more expensive, and they’ll eventually have to decide between raising their own premiums to unsustainable levels or pulling out of risky markets.