Why does insurance unnerve you? Also other than CPA and my very limited offer on GLBSE what else is going on?
Also 1/2 of the reason for my GLBSE insurance is to show the weakness of GLBSE not using something like open transactions.
Many PPTs offer insurance if Pirate defaults -- PPT.x, payb.tc, INAU, probably others. I do not want to insure against a Pirate default, but I may be interested in offering backup insurance on some of the primary insurers against a Pirate default (PPT.x in particular).
The sudden pop-ups of insurance offerings is unnerving me because I believe there are people out there offering insurance who do not have reserves to back it up, or have insurance reserves in the same investment program they're insuring against -- the insurers never get a liquidity check until the one time they need to make a major payout. Given many have only one focus (Pirate), if he defaults, every policy the insurer holds needs to be paid out in full.
So, say someone insured 100% against Pirate defaults, and did a pass-through where they offer, say, 15%/month, while effectively taking in 30%/month (with the new "variable" trust accounts, hard to know what the rate is, anymore, but I have doubts that it is significantly lower, if lower at all). There is strong incentive for that pass-through offerer to reinvest income in Pirate, since the offerer is obviously willing to take the entirety of Pirate risk at half the rate he'd get if he invested his own money, and it's assumed the pass-through offerer does have the money, since he's saying he can cover Pirate defaulting. If Pirate defaults then, if that person was tempted by Pirate's rates enough to have run a ponzi, everybody loses. The primary insurer gets nothing back, the insured get nothing back. I'm not convinced that will not be the case in more than one instance were Pirate to default.
I do not believe it very likely that anyone offering 100% Pirate insurance has reserves to back it up, and instead think they're offering false peace of mind. Given they're willing to take on the risk in full, it only makes sense that the insurer would make the bet himself with Pirate directly for the full rate. Instead of something like car insurance, where the insurer will have many smaller claims over time and calculates all those risks individually, where there should be no issue paying out when someone files - this is like there being an insurer which specifically covers something like hurricane damage in Florida, or an insurer who contracts with the government to say they'll give the gov't $5t in the event of nuclear strikes hitting thirty US cities within two weeks' time. It's dangerously undiversified, and not subject to any liquidity checks until the catastrophe hits.
The argument could be made that someone doesn't want to commit their own money because they want to use it for other stuff (this is the argument Pirate makes, I believe)... and this is similar to what "real" insurance companies do. They insure your cars, homes, employees - whatever - and they generally keep a small portion in reserves to pay out valid claims, while the rest is tied up in investments. But, for this to be both responsible and feasible, the insurer needs to have the money in liquid investments, and in the case of 100%-insured PPTs offering 15%/mo or whatever, this means they need to be making at least >15%/mo on something safe and liquid to remain economically sound (remembering the insurer could just place his own money in a Pirate account). Once the trust accounts go into effect and true rates for pass-throughs are kept secret, it may change... who knows what kind of margins PPTs could make off the uninformed. Pirate could pay his contractors (sub-leasers) 1.5%/day, and so long as it isn't public knowledge, the sub-leasers can sell 100% insured pass-through to investors @ 3.5% or whatever, and it could be both feasible for the insurance to work if necessary, and profitable for the insured pass-through offerer even in case of default.
The way insurance is offered around here is INSANE. Insurance companies know their variables. That's why I'm willing to insure PPT.x but not Pirate. I know the people behind PPT, I have a fair understanding of their financial positions and ability to pay out, and know the reserves they keep for PPT. A reasonable insurance company makes their policy-holders jump through all sorts of hoops for compliance, and adjusters will regularly visit the business to ensure they're compliant. If you're a business, you need to run things by your insurance company prior to doing something questionably unsafe. For example, if you have a plane insured, you damn well better ask your insurance company if they'll pay you out if you decide to start doing stunt shows with it. Or, if you have your employees insured against workplace injuries, the insurance company needs to know if you start having them use new machines, or if you're having the electrical replaced, or if you're buying new emergency stop buttons - and they'll want to know the manufacturers, and model of the new tools so they can make a solid estimate of how safe or unsafe they are, so they aren't making bad investments. In the Bitcoiniverse, people are offering insurance on investments they know nearly nothing on, making loans to people they know nothing about, and investing in "magic" companies. You can't assess risk on something there's no information on. If someone went into an established insurance building and requested insurance for their workers, then refused to say what the workers do, or give even an EIN for the business, the insurance agents would be rightfully annoyed that the guy who entered their building just wasted so much time -- it wouldn't be a calculated risk to offer insurance on whatever Mr. X does and refuses to talk about, and as such, is not grounds for a contract.
(agree GLBSE should at least let Issuers see who owns their securities)
