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You are working for a local insurance company located in Southern California, a region that has some of the highest earthquake risks in the U.S.

You are working for a local insurance company located in Southern California, a region that has some of the highest earthquake risks in the U.S. Your firm is considering offering two new insurance products for two distinct types of pure risks, where the policyholders' losses will be combined in a risk pool: Policy A: car insurance for property and liability damages for local residents only. Policy B: earthquake insurance for property damages for local residents only. Which of these policies would be expected to benefit the most from risk pooling? Briefly explain your choice by considering the correlation among losses under each policy.

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