Buffet uses the held premiums - called _float_ - to invest in assets which generate a higher than required return for the eventual insurance claims.
The way he sees it, the float is an interest free loan that you never have to pay back, as long as your incoming premiums each year are roughly equivalent to your outgoing claims each year. His strategy is to use this interest free loan to generate as high a return as possible, which he can then cream off the top for shareholders.
But it's only possible when you're well-capitalised and not as dependent on cash flows. See also the Kelly criterion, which makes it logical for one actor to offer and another to pay for insurance, despite the fact that both sides cannot have positive EV.
> despite the fact that both sides cannot have positive EV
Maybe for the thing insured, but dependencies can cause ripple effect costs which can be very high, so both sides can have positive EV when considering the whole (not just the insurance). I think you are assuming all transactions are zero-sum? Not something I know much about, so quite probably I just misunderstand your comment.
The way he sees it, the float is an interest free loan that you never have to pay back, as long as your incoming premiums each year are roughly equivalent to your outgoing claims each year. His strategy is to use this interest free loan to generate as high a return as possible, which he can then cream off the top for shareholders.