Prize indemnity insurance

Prize indemnity insurance covers the organizer of a game, promotional lottery or sporting challenge (hole-in-one, penalty kick, half-court shot) against paying the promised prize if the winning condition is met in the exact terms of the rules. A textbook case: an amateur tournament, 150 players, one attempt each on a par 3, a 50,000 euro prize for the first hole-in-one. At one chance in 12,500 per shot, the probability that at least one player makes it is 1.19%, the pure premium 596 euros, a rate on line of 1.2%. The craft comes down to two moves. You estimate the probability, then you draft the winning condition (distance, witnesses, number of attempts, standard of the participants). The second move matters as much as the first, because loose wording shifts the odds without shifting the premium. The risk is binary. The insurer keeps the premium or pays the whole prize, and the law of large numbers works only across the book. It takes about eighty-four such tournaments for the cumulative pure premium to equal a single prize, so a probability wrong by a factor of two can go unnoticed for years. People mix it up with event cancellation insurance, which pays when the event does not happen, while prize indemnity pays when it goes too well. Its close cousin is over-redemption cover, for a promotion where more customers than planned claim the promised refund. The market writes it as a specialty line, on sums ranging from a club golf day to a televised game show. It has the shape of a high reinsurance layer: low frequency, full amount, a premium read as a rate on the limit.