Insurance Risk Models

Insurance risk models are tools companies use to estimate the likelihood and potential cost of future claims, helping them set appropriate premiums and manage financial stability. They analyze historical data, trends, and variables like age, health, or property value to predict risks. These models account for randomness and uncertainty, ensuring that insurers can cover future claims while remaining profitable. Essentially, they provide a structured way to evaluate and balance risk, enabling insurance companies to make informed decisions about coverage, pricing, and reserves.