Insurance: Life, Property and Casualty, and Reinsurance

Insurance is the one financial business that sells its product before it knows what the product costs. A policyholder pays a premium today; the insurer finds out months or decades later what the claims were. In between, it holds the money. Global premiums were about $7.8 trillion in 2024 (Swiss Re Institute, sigma 2/2025), split roughly between life and non-life, and the industry owns tens of trillions of dollars of bonds, loans and property. Two numbers explain most of an insurer's economics: the combined ratio (claims plus expenses as a share of premium, where below 100% means an underwriting profit) and the float (money held for future claims that the insurer invests in the meantime). Warren Buffett built Berkshire Hathaway on float that reached about $176 billion at the end of 2025 at a negative cost, because its insurers made underwriting profits (2025 annual report). AIG nearly destroyed itself, and needed a government rescue of up to ~$182 billion, by writing insurance-like credit protection with no float, no reserves and no limit. This section covers how property and casualty (P&C), life and reinsurance companies make money, the underwriting cycle, reserving and why it is where insurers hide their mistakes, catastrophe risk and capital markets, Lloyd's, distribution, the private-capital takeover of life and annuities, insurtech's mixed record, and the US property-insurance squeeze in Florida and California. A worked example computes combined ratios, float income, a catastrophe year and a reserve deficiency, and a checklist sets out diligence questions.