Many clients self-insure their smaller property losses. Property
self-insurers purchase reinsurance or "excess" insurance to cover losses that are too large to self-insure without putting
their financial health at risk.
Self-insuring relatively small losses saves money in the
long run just as choosing a higher deductible saves a motorist money when he purchases an auto insurance policy.
Actuarial assistance is vital in choosing the "right" amount
of self-insurance, given a client's financial position, the cost of excess insurance, and the client's past track record
of property losses.
Property is actually one of the riskiest coverages that clients
self-insure. Most clients have many fewer property losses than workers' compensation or liability losses, especially when
one disregards the relatively common small losses of less than $1,000. The relatively low frequency of property
losses, combined with the potential for extremely large loss amounts, makes property insurance so risky.