I'm asking this at FlyerTalk because I can't get a response from PrivilegeFlyer (which in itself is not reassuring).

Who ultimately is insuring PrivilegeFlyer?

There is a very good chance that a major airline is going to roll over and die within a year. As I understand it, in this event, PrivilegeFlyer compensates you somehow for your miles, in a manner that I wasn't able to deduce from the website. However, in this case, who coughs up the $$$?

I see an agency problem here, since unlike car/house insurance, it is not mandatory. One, only people with large numbers of miles (over 100,000) will insure them, because the price to insure is so high. Second, those who do so truly believe that their airline is going under. In this event, the payout will be huge. So huge, in fact, that I am suggesting that PrivilegeFlyer will not be able to pay all claims at 100%, negating the whole issue of insurance in the first place.

No offense to Randy, but we've seen what happens to poorly-capitalized dot-com ideas in the past 2 years when bad luck befalls them. How is this different?