You are the chief risk officer of a large consumer group in Madrid. After an operational scare, the board wants to "insure everything insurable." On the table you have the group's risk map and policy quotes for each risk. The question isn't whether to manage risk —of course you should— but which risks to transfer to an insurer and which to retain. And "insuring everything" isn't the prudent answer it looks like.
The situation
The group's risk splits into two types. There are many small, frequent, and diversifiable risks (minor plant damage, small fluctuations): their expected loss adds up to ~€80M a year, but since there are many and they're independent, they barely move the group's overall result. And there's a rare catastrophic tail: expected loss of only ~€20M a year, but one bad event could be big enough to threaten the group's viability.
The insurer doesn't work for free: it charges a loaded premium —say, 1.4 times the expected loss— to cover its costs and margin. Here's the logic of enterprise risk management (ERM): paying that loading makes sense for the tail that could bankrupt you, because variability there really matters. But paying it for the small risks you already diversify internally is giving away the insurer's margin on something you can absorb yourself. Mars became famous for retaining most of its risk for exactly this reason.