Huebner's Risk Theory

Huebner's Risk Theory models insurance as a way to manage financial uncertainty by analyzing the probability and impact of future losses. It examines the relationship between the insurer’s income from premiums and the expected payouts for claims, focusing on balancing risk and profitability. The theory emphasizes that by accumulating enough premiums and reserves, an insurer can cover claims even with unexpected losses, ensuring financial stability. It employs statistical methods to estimate risks, helping insurers set appropriate premiums and reserve levels to sustain operations over time despite uncertainties.