The William Companies ( WMB) owns and operates natural gas pipelines that deliver 12%

of the natural gas consumed in the United States. WMB is concerned that a major hurricane could disrupt its Gulfstream pipeline, which runs 691 miles through the Gulf of Mexico. In the event of a disruption, the firm anticipates a loss of profits of $80 million. Suppose the likelihood of a disruption is 2.5% per year, and the beta associated with such a loss is -0.10. If the risk-free interest rate is 4.5% and the expected return of the market is 9.5%, what is the actuarially fair insurance premium?