Wednesday, September 17, 2008
Insurance against Catastrophic Failure
An interesting suggestion by Yale School of Management professor Jonathan Koppell in today's NY Times (Op-Ed Contributor - "A Failure Tax"): companies that are "too big to fail" ought to pay premiums for catastrophic risk insurance that would fund their rescue in the event they are at risk of failure. There would be all sorts of challenges in implementing this in practice (e.g., Which firms would be covered? How much should the premiums be?, etc.), and Koppell briefly touches on them, but in principle, it's an idea worthy of consideration.