Float

Money an insurer holds between collecting premiums and paying claims, which it invests for its own account in the meantime.

The concept became famous through Berkshire Hathaway, and the reason is arithmetic. An insurer with a combined ratio of 98% is being paid two percent to hold other people's money, so the float is funding with a negative cost, and the investment return on it is pure gain.

The reverse is equally true. An insurer at 110% is paying 10% for its float, which is more expensive than most borrowing, and no investment skill rescues that.

Float is only valuable if the underwriting is disciplined. That is the whole lesson.