Ideally. But if you start up a company in Texas, and you make marketing and sale inroads in a single big city at a much faster rate, you have a problem.

It's a bit easier in Texas with multiple large cities. But if your marketing and sales take off in one region, you can find yourself vulnerable to a single hurricane hitting the coast, for instance.

Since insurance is so heavily state regulated, if you are limited to your one state that has one big city, you may have that risk no matter what. Bigger companies can span multiple states, of course. Smaller companies will have to have their portfolio underwritten by another insurance company.

Generally you reinsure yourself with other insurance companies, so that if you get more than a certain amount of loss in a single year, other insurance companies cover the extra. This risk can be spread between several reinsurance providers, taking a percentage each.

Lloyds of London is a marketplace where a lot of insurance companies reinsure with each other, or with "syndicates" which are groups of investors.

This kind of dynamic brings home how screwed small landlocked countries are (unless they're part of something like the Eurozone). And conversely, how amazingly lucky I am to have been born in the US.