Example: sell attractively priced insurance against a 100-year-flood. You make money for 20 years, but then a crazy big flood bankrupts your insurance company.

Example: sell attractively priced insurance against a 100-year-flood. You make money for 20 years, but then a crazy big flood bankrupts your insurance company. Who would have thought that would happen?! Options (and other things) can be structured to create 'catastrophic insurance like' outcomes.