Page "Insurance" Paragraph 8

# Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer.

Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer.

If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.

( See the US Financial Accounting Standards Board standard number 113 )