https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AFloatDefinition:Float - Revision history2026-06-13T13:05:58ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Float&diff=6863&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-10T04:53:31Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>🏦 '''Float''' is the pool of money that an [[Definition:Insurance carrier | insurance carrier]] holds between the time [[Definition:Premium | premiums]] are collected from policyholders and the time [[Definition:Claim | claims]] are paid out. Because insurance is a "collect now, pay later" business, this timing gap creates a reservoir of investable capital that can generate significant [[Definition:Investment income | investment income]]. The concept is central to the economics of insurance — Warren Buffett has famously described Berkshire Hathaway's insurance float as the engine behind the conglomerate's investment strategy.<br />
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📈 Carriers receive premiums upfront, often months or years before claims arise. During that interval, the funds are invested in bonds, equities, real estate, and other instruments. In long-tail lines such as [[Definition:Workers' compensation insurance | workers' compensation]] or [[Definition:General liability insurance | general liability]], where claims may not be settled for a decade or more, float can remain invested for extended periods, amplifying its value. The size and duration of float depend on the [[Definition:Underwriting | underwriting]] mix: a company writing mostly short-tail [[Definition:Property insurance | property]] business will generate float that turns over quickly, while a [[Definition:Reinsurer | reinsurer]] focused on [[Definition:Casualty insurance | casualty]] treaties will hold funds far longer.<br />
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⚖️ What makes float so powerful — and so perilous — is that it functions like borrowed money, but only "free" if the carrier's [[Definition:Combined ratio | combined ratio]] stays at or below 100%. When underwriting losses exceed investment returns, the cost of float turns negative and erodes capital. Regulators pay close attention to how carriers invest their float, imposing [[Definition:Asset-liability management | asset-liability management]] requirements and [[Definition:Risk-based capital (RBC) | risk-based capital]] standards to prevent excessive risk-taking. For [[Definition:Insurtech | insurtech]] startups building new carrier models, understanding and managing float is a critical hurdle — it separates companies that can self-fund growth from those that remain dependent on external capital.<br />
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'''Related concepts'''<br />
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* [[Definition:Investment income]]<br />
* [[Definition:Combined ratio]]<br />
* [[Definition:Loss reserves]]<br />
* [[Definition:Premium]]<br />
* [[Definition:Asset-liability management]]<br />
* [[Definition:Risk-based capital (RBC)]]<br />
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