The unemployment insurance (UI) system in the United States differs from a standard competitive insurance market in at least two ways. First, because workers and firms can influence the probability of an adverse event (unemployment), there is a moral hazard problem. Consequently, an optimal insurance program would require coinsurance of unemployment risk.1 A second difference, which has received less attention than the first (in the recent UI literature), is the fact that much of unemployment risk is undiversifiable aggregate risk.2 If shareholders of firms are averse to aggregate risk, an optimal UI program will require coinsurance of aggregate risk.