Walter White’s side business
Ever wonder what Heisenberg’s (aka Walter White’s) risk profile would look like? Well, I’m a bit of a nerd- so admittedly I have...
In a hypothetical sense- surely there would be cash flow, high liquidity, plenty of profit and it’s unlikely to face any economic downturn- the product is always in demand..
Heisenberg was probably the only drug dealer “start up pharmaceutical manufacturer & distributor” that put some legitimate care in manufacturing the product for its purity in yield. He also had an educational background in the field, and he made sure he had a lawyer as an advisory. It would not have been an impossible task to go through the paperwork to set yourself up as a manufacturer for medication for ADHD and obesity* when looking for insurance coverage.
On paper it would probably look great- if we were to narrow our assessment to looking at financial statements and annual reports only… The larger question is, should we be morally accepting a risk such as this? Is it the insurer that practices ethical insurance coverage or the broker trying to place this?
If you were to accept the risk, how would your product- policy wording- react to potential claim triggers, and, how would a pharmaceuticals manufacturing and distribution company for amphetamines affect your business reputation if a large loss was to occur? It may fit in your risk appetite in a broad sense, but the human touch has always been to distinguish if a risk is a good fit for the product, even if it fits the criteria from an appetite perspective. Chances are, you could analyze the risk profile through the most rigorous rating infrastructure, but the moral and ethical hazard is not something that can be rated for. This is not an immediately visible risk in any rating system.
An aspect of considering risk, moral and ethical accountability is a vital skill. You could price this to be well and truly over your recommended technical rate if there is some scope within your appetite- yes- everyone needs insurance- yes. However, insuring clients for profit instead of seeing the moral hazard often repeats a cycle, which is, when there is a large loss, it’s often these risks that are going to blow claims costs to the detriment of what was modelled for any portfolio- a questionable moral hazard risk will always end up skewing your book negatively.
*There is actually a legal methamphetamine product manufacturer based in the US- but it is rarely prescribed. The modern medications for ADHD are chemically related but less potent.