Brilliant! So, instead of going bankrupt, you arrange to have the RIAA paid the full amount of their judgement. Just like with professional liability insurance, the RIAA now has more incentive to sue, which creates more incentive to buy insurance. Pretty soon, almost everyone's paying a little bit of money every month to download music.

You sure showed those RIAA guys! And they thought they had this whole thing worked out.

"Pretty soon, almost everyone's paying a little bit of money every month to download music."

I.e. cheap licencing, which is what they should have don in the first place.

First problem is that you'd have to put up quite a bit of capital as loss reserves. Then you have to worry about people who buy your insurance taking on extra risks now that they're insured against the costs. Finally, the RIAA/MPAA would do whatever it took to get your client list, then sue all of them, bankrupting you.

The problems aren't problems per se, the insurance business has those pretty well figured out (you hedge the risk on a reinsurance market like Lloyds of London). Only question is if you can get some rates/terms that clients would accept.

If *AA got such a list and started suing using is as a base, well, at least you'd have a well-funded entity fighting on you side.

Surprisingly http://www.tankafritt.nu/uk/ seem to be doing that, the main site is in Swedish so I'm not sure what the actual deal is.

Could be implemented as contracts in a prediction market.