Labeling insurance float as a simple contingent liability is not an underestimation but a fundamental recognition of its nature as an uncertain liability.
If we were to evaluate it with fresh eyes, would we really want to re-integrate such a resource as free and non-dilutive capital?
Liquidity requirements and claims reserves, like those prudently managed by GIC in Singapore, highlight the real cost of this 'capital'.
This float is not without cost; during underwriting stress periods, companies may be forced to withdraw from risky investments to honor their obligations.
The idea that it generates an alpha without dilution ignores regulatory constraints and claims management fees weighing on this fund.