BIS central bankers’ speeches  1  Allow me for a moment to be somewhat schoolmasterly and use the example of car insurance to illustrate the 2 basic trade-off. Car insurance is obviously desirable ex post, since it is not optimal for people to bear the consequences of a car accident by themselves.
We are all more or less risk averse and feel much better when we have such car insurance. Without it, some of us would stop driving altogether if we had to fully pay for the consequences of an accident. Insurance improves ex post efficiency.