He added that racehorses, on average, do not have a long racing life because they “run into problems. They hurt themselves, or they start running slower.”

Mr. Hoffberger explained that Sakatoga Stables owners had looked at the horse for $65,000 and decided not to purchase him.

Meanwhile, he said, Barclay Tagg, now the horses trainer, followed its progress. “The horse was sold and ran in a claiming race for $65,000 and did well,” Mr. Hoffberger said. “The owner sold the horse to them for $75,000 a few months later.”

Since Funny Cide is a gelding and cannot be bred, “he will continue to run,” he said. “He has no residual value as a stallion. What you see on these nice geldings is that they follow the same training course and races as the colts.” A colt, however, might be stopped from running “because someone might offer a lot of money to stand as a stallion.”

As one of the top horses in the world, insuring a famous horse like Funny Cide is “easy,” he said. “You have a top-notch trainer, nice people own the horse, and the horse is making them a lot of money.” At the opposite end of the scale is “where you have a $5,000 claim and the horse barely eeked out a living.”

For example, “Say someone won the lottery and bought a horse for $5,000,” he said. “They insure the horse for the purchase price, the horse gets older and it gets slower. They stop [racing the horse] because the horse develops some problems or it is more valuable as a breeding horse. The $5,000 filly doesn't have much value,” he said.

He continued: “You look to make sure that the average horse is not overinsured and that the people are treating that horse the same way that the Sakatoga people are taking care of Funny Cide.”

“If you don't know what's happening with a horse when it has problems, it's tough to manage,” Mr. Hoffberger said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 4, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.