Figure20-3The Supply of Insurance This is the supply of insurance policies to provide £1000 in coverage to a merchant ship that has a 10% chance of being lost. Each investor has £1000 of capital at risk. The lowest possible premium at which a policy is offered is £100, equal to the expected claim, and only a risk-neutral investor is willing to supply this policy. As the premium increases, investors who are more risk-averse are induced to supply policies to the market, increasing the quantity of policies supplied.