Suppose movie producers could buy "box office insurance" that guaranteed them a specified gross revenue for a particular film. Such policies could be very valuable economically. Producers might produce risky movies. Insurance companies could find selling such policies appealing in principle as well: if insurers spread their risk over enough movies, they could earn enough premium from successful movies. So why there isn't such policy?

Question

Business

Isabell Burnett

6 May, 04:02

Suppose movie producers could buy "box office insurance" that guaranteed them a specified gross revenue for a particular film. Such policies could be very valuable economically. Producers might produce risky movies. Insurance companies could find selling such policies appealing in principle as well: if insurers spread their risk over enough movies, they could earn enough premium from successful movies. So why there isn't such policy?

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Hadley Sheppard · Answer 1

Answer and explanation:

Out of the vast number of movies produced only a few of them become blockbusters. Thus, insurance companies see reduce their chances of insuring such movies. If they would not take this into account and provide a policy to regular and bad performing selling films, insurance companies would be paying huge amounts of money to their producers which is not convenient for them.