When you choose an insurance plan for the next period, it is important to understand that the best choice can be only between two options - insurance plan 4 or 0. Insurance plans 1, 2 and 3 are less favorable than 4.
Plan 0 is selected when Incoming insurance > Insurance premium, where Insurance premium = Force Majeure - Uncovered risk.
Therefore, when you select insurance plan, you need to forecast Force Majeure (FM) in the next period. In the old version of the GMC simulator in each scenario was laid a large number of random FM sequences. And it was impossible to predict FM in the next period for optimal insurance plan. In new version of the GMC simulator in each scenario has remained a unique sequence of FM. And optimal insurance plan can be easyly determined if you have a full set of reports of scenario.
For example, scenario 12C1 has FM sequence:
- 1 period - $34 483
- 2 period - $0
- 3 period - $352
- 4 period - $0
- 5 period - $810
This is basic FM sequence (mini-scenario). It means that with certain range of solutions FM will be identical for all playing teams. The main factor which affects on FM sequence is Management budget (MB). Increasing MB reduces the cost of FM. For example, if you play with big MB scenario 12C3 insurance is not necessary. Reducing MB immediately entails unscheduled FM, even if it is not provided in basic sequence. If FM is already provided (as in 1 period in scenario 12C1), the effect is not formed and FM is not increased. Next periods follow basic FM sequence.
Note: all of the above is true for the current version of the simulator, but can be replaced by random FM sequence in future scenarios.
Optimal strategy is Insurance plan 4 when the Insurance payments exceed Insurance premium and plan 0 in all other cases.
Scenario 12C3 basic FM sequence:
- 1 period - Plan 0 - 0
- 2 period - Plan 0 - $3 472
- 3 period - Plan 4 - $44 448
- 4 period - Plan 0 - $8 618
- 5 period - Plan 0 - $346
In scenario 12C3, if you play with large MB, then risk of FM is almost eliminated:
- MB 180-180-180, then FM in 3 period will be $35 349
- MB 250-250-350, then FM in 3 period will be $10 451
- MB 300-300-300, then FM in 3 period will be $10 502
You can find the best Insurance plan for each scenario in our database catalog.