The End of Insurance

Plus: More China "Fintech", Scale in Asset Management, Billion Dollar Whale

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The End of Insurance

Daniel Bernoulli wasn’t even the best mathematician in his own family. But his contribution to the study of risk is profound. 

In his essay of 1738, Exposition of a New Theory on the Measurement of Risk, Bernoulli applies his mind to the question of insurance. The basics of probability theory had already been unearthed, but Bernoulli was puzzled by how insurance fit into its framework.

His thinking goes like this: to be viable, an insurer would need to charge a premium at least equal to the expected value of any claims that may be made against it; to lock in a p…