Carlos Rossi

The assertion that the insurance float is mainly a contingent liability ignores the reality of the actors who use it as a powerful competitive advantage.
Market leaders, such as Berkshire Hathaway, beat the competition by transforming these funds into productive capital, even with long-term obligations, which allows them to win the race for alpha.
It is the ability to manage risk with discipline and to allocate capital intelligently that makes the difference, not the simple nature of the float as a liability, as demonstrated by the consistent performance of dominant insurers who know how to turn reserves into strategic levers.

The idea that insurance float is mainly a low-cost investment capital ignores the reality that it is a contingent obligation with finite liquidity requirements. Confusing a liability with a perpetual funding source is a costly mistake; premiums are not free capital but funds that must be repaid, often unexpectedly. For example, a series of natural disasters or an epidemic can quickly exhaust reserves, turning a source of returns into a drain on liquidity. There are no unlimited funds; the balance sheet has limited room for maneuver.

The concept of "perpetual" for a source of funding is illusory; even the insurance fleet is a finite resource with a limited lifespan.
What many consider as free capital often turns out to be a contingent liability that reduces the room for maneuver.
Strict regulatory requirements from SEBI and RBI in India quickly turn this "fleet" into a concrete liability if underwriting management fails, as seen with insurance companies facing unexpected claims increases during the pandemic, forcing them to mobilize reserves that could have been invested.
Our investment capital is a too precious resource to let it dilute like that.