Loss Distribution

Loss distribution is a statistical method used by insurers and risk managers to understand the range and likelihood of possible financial losses from events like accidents, natural disasters, or other hazards. It models how much a company might lose over time, considering different scenarios — from small claims to catastrophic events. By analyzing this distribution, organizations can assess their risk exposure, set appropriate premiums, and ensure they have enough reserves to cover potential payouts. Essentially, it provides a comprehensive picture of potential losses, helping in better financial planning and risk management.