Run an insurance company for a century.
Darker is riskier. The large squares were your customers.
The company’s money. Claims come out of it.
Nothing yet.
Closed
Nobody is insured yet.
Households decide once a year. A new price takes a year to arrive.
a policy. No single storm or earthquake costs you more than .
What you leave in the company keeps it alive and is never yours.
Fire. About fires start in a year, more of them in the careless houses. A fire can jump to the house next door, and sometimes it keeps going.
Windstorm. One year in . It cuts a swath across town and takes a piece of every roof in it. Most swaths are narrow. Some are not.
Earthquake. About a century. Damage falls off with distance, and the size has no typical value: most are local, and a few take the town.
Every household knows roughly how risky it is. You don’t. The careful ones leave first when the price goes up, so a higher premium buys you a smaller book of worse risks.
A house that burns or falls is rebuilt, and for a while there is nothing left of it to lose. Disasters hit the whole town. You only pay for the squares that pay you.
Premiums go into capital and claims come out of it. Your cut is paid at the end of each profitable year. There is no other way to get money out, so every dollar of safety is a dollar you gave up.
Below zero is ruin. The company closes, and whoever was waiting on a claim is not paid. You keep what you already took.
Each century is numbered. The number decides the town and every disaster in it, so the same century plays out the same way whatever you charge.
Hindsight is available. It is the only time anyone has priced an earthquake correctly.