Insurance doesn't mitigate damage, it amortizes it (typically across a group of entities). The expected average annual claims on an insurer's policies need to be lower than the sum of the premiums or the insurer loses money.
This is why people in high risk categories pay more for insurance (eg young people and people with high performance cars have higher car insurance premiums because statistically they crash more often and/or have higher rates of total loss)
The insurance being used to fight the patents seems good: it's effectively a way for the group to pool resources towards not paying out to patent trolls. The success of the insurance company should be based on the reduction of payments to trolling, even when counting the insurance as paying to patent trolls
What'd be most disheartening is if the insurance was just to pay off the patent trolls
In this case it does because someone with insurance is a poor target for patent trolls. Assuming it becomes common you get 'herd immunity' as patent trolls become less effective which also lowers the cost of the insurance.
Also, "I have legal insurance, you can talk to my lawyers" might be a turn-off for trolls, effectively diminishing what would be spent in this specific case.
Well, yes and no. For the single insured it is there to mitigate damages that otherwise would be catastrophic. I hope that I will lose money by buying insurance, because that means nothing really bad happened to me.
Normally you'd be correct, but in this case troll insurance actually produces a game theoretic reduction in trolls. Going to court costs trolls resources, time if not money. By guaranteeing that all trolls will be fought tooth and nail, it makes trolling more costly, which makes it less attractive, which means there will be less of it.
This is why people in high risk categories pay more for insurance (eg young people and people with high performance cars have higher car insurance premiums because statistically they crash more often and/or have higher rates of total loss)