Risk Pools

Risk pools are groups of individuals or entities that come together to share potential financial losses from uncertain events, such as accidents, health issues, or property damage. By combining their risks, members can lower the likelihood of facing significant losses alone. In insurance, for example, policyholders pay premiums into a pool, which then funds claims made by those who experience losses. This system helps ensure that everyone contributes to and benefits from the financial support in times of need, reducing the burden on any single member. Essentially, it spreads out risks among many participants.