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[QUOTE="The Yakk, post: 4981464, member: 9988"]
This is all true, good analysis.

Pricing for this deal was generous for the insurers.  Even considering the good outcome, DB should not be paying these kind of premiums routinely.

I had one big loss during my time in this business--my company paid out about 5 million Euros when Italy won the World Cup in 2006.  Fiat was the client, and we covered the cost of all the refunds.  Basically, we bought free Fiats for a bunch of Azzuri fans.

Even so, the premium was greater than $2m as Italy was one of the favorites.  That premium was way above the price you could get in the gambling market, never mind the fair price for the risk.

But there was other value in it for Fiat.  With this promotion, they sold a buttload of their crappy cars in the months leading up to the World Cup.  That alone made the $2m premium almost worth it; the fact that Italy won was just gravy.

In fact, most of the deals in this business are for promotions like that one.  It is rare for the team itself to be making this kind of bet.  For good reason: the pricing is horrible, and the team does not get the ancillary financial benefit from sales they are promoting.
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