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All products, if they're properly designed and priced, should produce a reasonable return. We tend to live with the Weather Channel in the spring and summer months. When Mother Nature decides to get ugly, it impacts our book of business. We insure a lot of manufactured housing and low-valued housing, principally, property risks.

Weather can include anything from tornadoes to floods, hurricanes, snowstorms, ice storms and more. When we come up short, likewise, it's reflected in our premium rate levels in the form of increased rates to absorb the impact of excessive weather. When we benefit, it's reflected in our premium rate levels, either in the form of rate decreases or in the form of lesser rate increases. When weather is better than average, we benefit, and when it's worse than average, we come up short. We do know, however, what she's done to us on average over time; so, we build our premium rate levels and our business forecasts based on historical weather loss averages. The one thing we can't predict is what Mother Nature is or isn't going to do to us in a given year. In much the same way as a life insurer can predict death rates from mortality tables, we can reasonably predict our losses based on the history of our book of business and the nature of the policyholder. We can generally price for most of these factors. Aside from the moral hazard, the physical condition and location of a property can also provide insight into the nature of a given risk.

The odds are pretty strong that there isn't going to be an accident, but if there is an accident it's going to be catastrophic in nature. I'll use as an example, insuring the space shuttle. They price more exotic products to yield a significant profit in years where there isn't a loss, but they run the risk of absorbing a potentially very significant loss when one does occur. Some companies subscribe to the bigger risk, bigger return theory.