Investopedia does not include all offers available in the marketplace. Yes, depending on the insurer, there are some differences in what probable maximum loss means. All this information helps set the premium. You may disable these by changing your browser settings, but this may affect how the website functions. Various elements which may either increase or reduce the intensity or ferocity of fire are taken into consideration. | Meaning, pronunciation, translations and examples hb```f``2,K@90iR(yTtrzY]V2>+ {Y1)@ The Probable Maximum Flood (PMF)" is the flood that may be expected from the most severe combination of critical meteorological and hydrologic conditions that are reasonably possible in. endstream endobj startxref Download to read the full article text. PML can also be stated as a percentage of the insured property's entire value. But what exactly is PML? These findings reflect three important trends. Buy Now & Save, Save Time Billing and Get Paid 2x Faster With FreshBooks. The scope of our analysis includes: For more information or to contact one of our experts please call us on +44 (0)2086141444, Expert View on Defects and Failures in PV Modules, Partial Collapse of Steel Structure at Cement Plant In South of Riyadh, Water Infrastructure System Risk Assessment in GCC, Fire in a Supermarket in Oxfordshire, England, Fire in Engine Compartment of Construction Loader in United Kingdom, Television Broadcast Interrupted After Cable Fault, Risk Assessment to Supplier of Foods in GCC and Mediterranean Area, Contamination of Raw Materials for Pharmaceuticals, Damage Assessment and Reinstatement of Cement Plant Following Fire, Risk Assessment of Resin Production Plant in KSA, Metallurgical analysis of Turbine Blade Failure in Desalination Plant in Saudi Arabia, Well only use this information to handle your enquiry and we wont share it with any third parties. However, fully sealed fire walls do hold in the model, unless they are exposed to exceptionally high fire loads, or an explosion is assumed to be very likely. Structural Separation solely refers to the expectancy that the distance between structures, such as administrative buildings and storage, or free-standing firewalls, prevent the further growth of the fire. However, PML can also be expressed as a percentage of the total value of the insured property. Step 5: Multiply the property value by the expected loss percentage. In my case this would calculate:.20 divided by .40 = .50 or 50%! For example, if a home is on the shore and its value is $300,000, and the house has been raised on stilts to avoid flooding as a risk mitigating factor, which reduces the expected loss by 30%, then calculating the probable maximum loss would be $300,000*(100%-30%) = $210,000. For example, an analysis might determine that risk mitigation decreases the chance of a total loss by 21 percent. Underwriter Joe, in measuring a shoe store's potential loss severity calculated what the expected loss would be under routine and anticipated operating conditions. The Probable Maximum Loss (PML) report is a common tool used by real estate investors, lenders and insurers to assess a worst-case scenario of building damage like from an earthquake, flood, fire or another natural disaster. All rights reserved. Probable maximum loss is expressed in dollars or as a percentage of total values. This compensation may impact how and where listings appear. The following variables are taken into consideration while calculating probable maximum loss (PML): property value, risk factors, and risk mitigating variables. CALCULATION OF LOSS PROBABILITY . McGuinness (18, p. 3), defines PML as that propor-tion of the total value of an exposure unit which will equal or exceed, with a stated probability, the actual amount of an individual loss . 3.1 Portfolio loss exceedance probability curves. 4`Y&EL,5kT43Gg!x!e MB]{-DdNDl:KY>>QFE+NE'+q%[LJNLeczvt$Ud537[_/UVtr`vFR3ySi|!XCI|. Depending on public and private decisions for resilience measures that mitigate losses and maintain a business function to ensure a quick recovery, it is complicated to estimate consequential loss beforehand. b. 1 0 obj << /MediaBox [ 0 0 415 598 ] /Type /Page /Parent 638 0 R /Resources << /Font << /F0 646 0 R >> /XObject 2 0 R /ProcSet 661 0 R >> /Contents 3 0 R /CropBox [ 0 0 415 598 ] /Rotate 0 >> endobj 2 0 obj << /im623 41 0 R /im624 43 0 R /im625 45 0 R /im626 47 0 R /im627 49 0 R /im628 51 0 R /im629 53 0 R /im630 55 0 R /im631 57 0 R /im632 59 0 R /im633 61 0 R /im634 63 0 R /im635 65 0 R /im636 67 0 R /im637 69 0 R /im638 71 0 R /im639 73 0 R >> endobj 3 0 obj [ 5 0 R 7 0 R 9 0 R 11 0 R 13 0 R 15 0 R 17 0 R 19 0 R 21 0 R 23 0 R 25 0 R 27 0 R 29 0 R 31 0 R 33 0 R 35 0 R 37 0 R 39 0 R ] endobj 4 0 obj 45 endobj 5 0 obj << /Length 4 0 R /Filter /LZWDecode >> stream "Is Probable Maximum Loss (PML) a useful concept?" The final step is multiplying the value of the property by the expected loss percentage. hZ{s6g;w1Nf'Nry$u06c*K$I?or`oQF(S#iMwXl=mLBRz'KQ4:OjL Hhh2&R66\coMbFOjRDUM5lmHdMtB}diu25'gi 0 To simplify matters let us take the below example. Determine the risk factors that are likely to cause an event that would lead to damage or loss of the property. In fact, even insurance companies often vary widely in PML calculations, primarily due to differences in how insurance companies view and weigh risks and risk mitigation factors. Which is the potential damage if these safeguards fail to do their job. 11 Things (2023) You Need to Know. The loss accumulation scenarios, risk models and vulnerability curves which have proved their value in property insurance are therefore unlikely to yield satisfactory results when determining the probable maximum loss in marine business. - YouTube 0:00 / 2:15 Basic Fundamental Insurance Terms & Policies What is Probable Maximum Loss or PML in. CEERISK engineers apply their extensive experience in loss consulting to develop models that can be applied by (re)insurers to understand the extent of the exposure. Partner is ready to help you with your career. At the same time, it is essential to emphasise that the magnitude of consequences following inaccurate calculations of exposure can have severe implications for the insurer. Common safeguards would be flood barriers or fire sprinklers. Applying Loss Methods within HEC-HMS. These near-term models reflect a five-year outlook, providing probable maximum loss estimates using projections of expected hurricane activity in the upcoming near-term period. Process Safety and Environmental Protection 84(2): 79-91. Copyright 2023 WTW. Analyzing the Disconnect Between the Reinsurance Submission and Global Underwriters' Needs Property Per Risk, Institute and Faculty of Actuaries. 9 Gustavsson, M., et al. There are several steps in calculating PML: The example above is a simplified version and the more risk mitigating factors that a property has, the further the probable maximum loss will be reduced. They believe that a loss is probable and that $800,000 is a reasonable estimation of the amount that will eventually have to be paid as a result of the damage done to the . The PML value can be expressed either as the Scenario Expected Loss (SEL) or the Scenario Upper Loss (SUL). Risk analysis 36(10): 1896-1915. Dont expect the amount you calculate to match an insurance companys PML calculation. Choose the maximum loss you are willing to take to your portfolio. endstream endobj 185 0 obj <>stream 732.380.1700phone, General Info Insurers are also required to file a form/questionnaire identifying the model and its direct effect in the calculation of the insurer's rates. The probable maximum loss (PML) is the traditional measure of earthquake loss popularized by the insurance and seismic engineering industry in the 1980s. (2014). Fire insurance covers damage and losses caused by fire and is often purchased in addition to standard homeowners insurance. Anything that consists of one or more buildings, rooms, or structures, which contain structural boundaries or separations themselves, can be considered complex. Insurers know that some policies will incur losses but most policies will not. By comparing the nine definitions, it becomes apparent that the main difference between them is forced by the degree of risk aversity chosen by the respective insurer. Furthermore, the model contains the assumption that any private or public assistance is delayed and at least two connecting fire areas are open. Maximum Credible Loss is defined as the largest monetary loss that can credibly result from a single major occurrence of an insured peril at a specific risk. Examples of risk factors include location, building materials, etc. The Probable Maximum Loss report identifies the PML value, expressed as a percentage of the building's replacement cost and estimates the potential damage during a 475-year earthquake - the lower the percentage, the lower the expected damage. 11 things (2023) you ought to know, National Grasslands: 11 Things (2023) You Have to Know, what is a breakwater? Second, as data become more tangible and easier to obtain, the insurance industry should promote the use of uniform models that are objective in the method to quantify the exposure. While there are many ways of estimating and presenting property risk exposure in the industry, there are nine commonly used definitions: NLE (Normal Loss Expectancy), MFL (Maximum Foreseeable Loss), EML (Estimated Maximum Loss), PML (Probable Maximum Loss), MCL (Maximum Credible Loss), MAS (Maximum Amount Subject), PML (Possible Maximum Loss), MPL (Maximum Possible Loss) and CL (Catastrophic Loss). D h1! 22 Sultana, Z., et al. C@%4RS@ccZK,~=;wCVh(!ziSi#w]M$^'n}%Va~KE]A>3I>eVl4sim (assuming that building no. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. In some nonlife insurance branches the probable maximum loss is of great importance for judging a given risk or a given collective of risks. It is a term that is most commonly associated with insurance policies for properties. Architectural Engineer Joins Team From Abu Dhabi. Probable maximum loss is a term used in both the insurance and commercial real estate industries to designate the value of the largest loss that could result from a disaster. Clients depend on us for specialized industry expertise. Fire Protection System (in bold) Uninsurable risk is a condition that poses an unknowable or unacceptable risk of loss or a situation in which insuring would be against the law. Save my name, email, and website in this browser for the next time I comment. Review our cookies information The X chart is shown in Figure 1. . You can use the methodology to determine the insured amount defined in the Space (Launches and Returns) Act 2018 and specified in the Space (Launches and Returns) (Insurance) Rules 2019. The more risk mitigating factors there are, the lower the probable maximum (PML) loss is. (2010). This is especially true when considering the premiums of insuring property that has a risk of a major event happening to it. For example, risk mitigation factors associated with a fire include functioning protection systems such as alarms, automatic sprinklers and portable fire extinguishers. To see our product designed specifically for your country, please visit the United States site. Well take a look in our handy guide. Step 4: Perform a risk analysis to determine the scale at which mitigating factors will reduce the probability of an event that would lead to damage or loss of the property. Pressure ruptures of process equipment resulting in shrapnel damage. The probable maximum loss (PML) is the absolute maximum loss that an insurance company can be expected to incur on any given insurance policy. Other entities, recognizing the need to limit seismic risk while remaining competitive also adopted "PML" policies which were less defined. West Coast Headquarters This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. . These studies, also known as Probable Maximum Loss (PML) assessments are compliant with ASTM E2026-07 and ASTM 2557-07. 8.4 Reporting Inventory at the Lower-of-Cost-or-Market. %PDF-1.5 % Understanding Probable Maximum Loss (PML), Fire Insurance: Definition, Elements, How It Works, and Example, Consequential Loss: Definition, Insurance, Vs. The PML is usually expressed in terms of dollar value or as a percentage of the building's value. l.c 'X0H``h)O(N-/KsnVVVVL$L5$BB$$[BLTD\@uof]}$) D- CI``h Q @.m 1t ` E @ qB!, It is often defined as the largest estimated loss arising from a single event, which was assessed with due care, taking into account all the elements of the risk. / The first of these two definitions is pertinent to the insured and his risk . Along the way, the term probable maximum loss (or PML) came into use, but had many different definitions based on the risk tolerance of various lenders and owners. What Does Homeowners Insurance Cover and Not Cover? International Journal of Chemical Engineering 2010(Article ID 104370): 1-13. Sum insured for building no. Maximum probable loss is inversely proportional to the size of a structure and the effectiveness of any protective safeguards. Insurers employ a variety of models and data to assess the risk involved in a policys underwriting, including the likely maximum loss (PML). hbbd```b``q] i? D2ovz`5 `, Probable maximum loss refers to the maximum loss that an insurer would be expected to incur on a policy. Probable Maximum Loss After the term EML, the second most commonly used term is Probable Maximum Loss (PML). Probable maximum loss is generally communicated as a dollar sum. You can decline analytics cookies and navigate our website, however cookies must be consented to and enabled prior to using the FreshBooks platform. 866.928.7418 faxinfo@partneresi.com, Media Contact More than ever, making the most of your capital means solving a complex risk-and-return equation. For example, an insurance firm may estimate that insuring a house would cost $300,000 if it were completely damaged. This may include overall plans indicating positions of critical elements and adjacent properties. Learn more about Probable Maximum Loss Reports Estimated Maximum Loss, as defined by ROA, is an estimate of the financial loss that is expected to be within the realms of probability, sustained by insurers on a single risk as a result of a single fire or explosion. Calculating probable maximum loss (PML) takes into account the following factors: property value, risk factors, and risk mitigating factors. It assumes that there is no failure of existing safeguards like fire sprinklers (in the event of a fire) or flood barriers (in the event of a flood). 4 Arunraj, N. S. and J. Maiti (2009). Flow Frequency Simulation Options in HEC-HMS. The probable maximum loss is regarded as the worst-case scenario for whoever the insurer is. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Gokce Capital | Privacy | Terms | Earnings Disclosure | Affiliate Disclosure | Do Not Sell My Info | Accessibility | Refund Policy. What Could Motor Insurance do for the bike crash victims? hbbd``b` $CC`$8_$ U m.L. The loss estimations are based on a variety of different information, including geo-information, empirical loss data, site visits by engineers and publicly available and private data; yet, to simplify the understanding loss estimation can in general terms be broken down to multiplying the sum to be insured by a percentage damage factor. The probable maximum loss (PML) is the maximum loss that an insurer is expected to lose on an insurance policy. Theyll use statistical formulas and frequency distribution charts to estimate the PML. (2015). First, the currently used models are to an extent subjective in nature and greatly dependent on experience as well as the person who conducts the calculations. Applying Baseflow Methods in HEC-HMS. Evaluating the reinstatement options and the cost required to return a property to its pre-loss condition. What that means is that you would . Risk & Analytics|Corporate Risk Tools and Technology, Matrix illustrating the effectiveness of each method of modeling, Head of Organizational Resilience Research, Learning to live with risks: Endemic, talent shortages, climate and geopolitics, WTW TMT Futures Report on 5 Mega-Trends and Geopolitics: Regulation and Legal Risk, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). More than just assessments. Association of British Insurers (ABI) has made the following recommendationswith regard to calculation of Estimated Maximum Loss (EML) and Probable Maximum Loss (PML). PML Calculation Description of Risk Class of Construction Asset % Damage Considered Block Value (USD) Expected Damage (USD) Building 25% 2,000 500 Machinary & Stocks 40% 4,000 1,600 Building 25% 1,000 250 Machinary & Stocks 80% 2,000 1,600 Building 25% 200 50 Machinary & Stocks 80% 800 640 Building 50% 750 375 Machinary & Stocks 60% 250 150 Surface streams that lose water directly to mine openings and to the shallow groundwater systems . During the early years of its use, VaR was often confused with probable maximum loss (PML); however, it is not the maximal or most probable extreme loss. Its an integral part of our business practice. This submittal request is not for hiring inquiries or solicitations and therefore will not be routed. 21 Soprano, A. A. n. L. (1974). (2021) Using geospatial property intelligence & GIS for risk assessment. Objective uncertainty factors are based on technological advancements and on the lack of guarantee in fire development and its confinement to one complex. Insurance companies typically use percentages that increase incrementally by 1 percentage point. fXIAt `p 'gb-}e0x+9@b F :>0@ ! Try It Free for 30 Days. hXF}bD)^:X~Y{8TK,/bwO8d:u^A~{j`X?x8H&6aa.dVNwX4Hu; n_FwlSSmY'(Rb"m"|j${_~UezI5;VqsNN6] eI9,(X wmaj1D"J'l&T8*`. The probable maximum loss (PML) is the maximum loss that an insurer is expected to lose on an insurance policy. Step 1: Find the dollar value of the property. hWkO8+8uihwY !Dj* ZsdZO_Gq&R-#9OR2Q Both these terms are used to understand the extreme consequences of loss for a given risk. EML/PML studies cannot be accurately developed based on theoretical knowledge of the risk and the exposure. The last step involves multiplying the value of the property by the expected loss percentage, which is the difference between the expected loss and the risk mitigating factors. Current NWS Probable Maximum Precipitation (PMP) Documents NOAA's National Weather Service has provided PMP guidance and studies since the late 1940s at the request of various federal agencies and with funding provided by those agencies. Washington, American Petroleum Institute. Note that the measurement increment in Table 1 is 0.1. Understanding probable maximum loss is important when acquiring insurance (especially for a commercial real estate property) because it represents the worst-case scenario for an insurer. Historically, the term probable maximum loss (PML) has been used to describe building damageability in earthquakes, that is, the likelihood a building will experience . Having dealt with catastrophic losses caused by fires, flooding, hurricanes, earthquakes, and many other factors, CEERISK engineers are able to develop EML/PML models that will accurately assess the exposure to risks across different industriesincluding banking, hospitals, refineries, power generation, heavy industries, and construction projects. Customs authorities shall decide about granting or recording such applications within a reasonable period of time from the submission of the applications. Calculate expected damages/losses 17. The resulting peak discharge will be the 25% PMF. Ranking hazards and risks in order of their severity and impact so as to measure consequences following the occurrence of a loss. EML or PML - Does It Make A Difference? To calculate the 25% PMF, use 25% or 1/4 of the PMP (Probable Maximum Precipitation) as the rainfall inut in your hydrograph model. "A risk based PML estimation method for single-storey reinforced concrete industrial buildings and its impact on earthquake insurance rates." Cession refers to the portions of obligations in an insurance company's policy portfolio that are transferred to a reinsurer. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. This role uses PML to estimate the highest maximum claim that a business will (most likely) file compared to what it could file for damages related to a catastrophic event. Probable Maximum Loss (PML) is defined as the damage to the building that has a specified probability of being exceeded within a given period from ground shaking as a result of seismic activity. 1. The maximum probable loss from an investment is the maximum percentage of risk that can be subject to a major loss at any given time. 11 Hashemi, S. J., et al. A typical figure estimated in relation to an insurers financial exposure is estimated losses in different scenarios. the catchment of a dam to calculate the probable maximum flood (PMF). Let's calculate expected loss, standard deviation, and PML for the shared loss distribution Maximum Probable Loss: 2, No reduction in Expected Loss and Maximum Probable Loss, but the standard deviation is reduced from 1,000 to 707. II, VVW GmbH. If the methods are compared in a simple matrix, the differences become clear. Probable Maximum Loss is the other most used concept with EML. Probable maximum loss (PML) is the maximum loss that an insurer would be expected to incur on a policy. Furthermore, it provides an attempt to specify what should be considered within the realms of probability and what should contrary be considered remote or unlikely coincidences and catastrophes. Heres what you should know if youre interested in what probable maximum loss means and how its calculated. "A grid based approach for fire and explosion consequence analysis." On This Page. EML is similar to PML; however, it may rule out remote coincidences, so it tends to be slightly lower than PML. For a specific event, such as a fire, contact your local fire station or inspector for assistance. However, it is reasonable to argue that policyholders who seek insurance coverage would benefit from a better understanding and standardized approach, allowing an easier understanding of the composition of the premium offered to them. BE!TPu(4*]r"$|^W03|w$mg}U)VnV 2. . A. I. P. R. W. P. (2017). This is because the MFL is the potential damage if these safeguards put in place to protect against major events fail to do their job. Maximum probable losses are generally inversely proportional to the size of the insured structure or property because the larger a property is, the harder it is to destroy. When determining the risk associated with a new insurance policy, insurance companies use various data sets. Although underwriters use complex statistical formulas and frequency distribution charts, the concepts involved are not difficult to understand. PML is the maximum percentage of risk that could be subject to a loss at a given point in time. eP)) The parameter Fire Protection Systems entails all technological measures expected to mitigate the growth of the fire, including fire-resisting doors, the presence and degree of function of the installation of fire detection, and fire extinguishing systems. 8.5 Determining Inventory on Hand. 181 0 obj <> endobj for more details. Casualty Actuarial Society: Is Probable Maximum Loss (PML) A Useful Concept? Estimated Maximum Loss (EML) and Probable/Possible Maximum Loss (PML) scenarios are typically used to understand the extreme consequences of losses for a given risk. Modeling Snowmelt. %PDF-1.4 % This is usually lower than the maximum foreseeable loss, the potential damage if such safeguards fail. Catastrophes and rare coincidences that are believed to be unlikely are excluded in the model. 5.1 Definition The PML is defined as the largest estimated loss arising from a single event which was assessed with due care, tak ing into account all the elements of the risk .In order to estimate Click to return to the beginning of the menu or press escape to close. "Assessment of business interruption of flood-affected companies using random forests." Definition & Examples, Insuranceopedia: Probable Maximum Loss (PML). Fire Fighting includes all public and private firefighting and the expectancy for it to arrive in time and be effective. The larger the building, the less likely the entire property will be destroyed; and the better the fire protection (sprinklers, alarms and public protection) the more likely a fire will be contained and extinguished . Correct estimation of financial exposure is crucial for the determination of premium and insurance coverage. PML reports are one of the most common requirements by lenders for real estate transactions. Insurance companies differ on what probable maximum loss means. This is under the assumption that there is no failure of existing safeguards. 2023 Insurtech Bangladesh. Conduct a risk analysis to estimate the degree to which risk mitigation factors decrease the chance a catastrophic event will demolish your business. Process safety progress 33(3): 285-291. When assessing the risk involved in insuring a new insurance policy, insurance firms employ a wide range of data sets, including probable maximum loss (PML). Estimated maximum loss assessments : London Market practice, Insurance Institute of London. Risk Assessment in the Chemical Industry August. Sign up for the latest industry news, thought leadership, and Partner happenings. Risk pooling It also has a 50% Quota Share . Evaluating a building's seismic risk, and the information in a PML Report. Availability of sufficient and reliable sources of water. Find out more. (2014). Insurers can use the Estimated Maximum Loss figures that they have to determine a worst case scenario, and then set their rating accordingly for this overall class of business. No particular tools can measure PML. Janet Berry-Johnson is a CPA with 10 years of experience in public accounting and writes about income taxes and small business accounting. PML represents a worst-case scenario from the insurers perspective. Tysers Dhaka Office Address and its Management. Maximum possible loss. Probable maximum loss. From left to right, the definitions decrease in risk aversity, with Normal Loss Expectancy (NLE) assuming the lowest damage to property and Catastrophic Loss (CL) the highest. Step 3: Consider risk mitigation factors that can prevent damage or loss. Proceedings of the casualty actuarial society LVI. Summary. The definition resulting in the highest damage is Catastrophic Loss, an estimate of the loss that will occur at a site as a result of the following types of events: However, even those events do not include sabotage, natural disasters such as hurricanes or earthquakes, or falling aircraft. For example, for fires, these could include the proximity to a fire station, alarms, and sprinklers. The competitive nature of the industry and an unwillingness to share detailed information about exposure models make an accurate presentation of tools and comparison of methods challenging. "Risk-based operational performance analysis using loss functions." This also aids in setting the premium that is to be paid. You have to master the analytical ability to assess based on the survey report findings. For example, calculations of probable maximum loss (PML), which is the probable cost of repairing . However, it also provides a definition of a single risk and a list of parameters to be taken into account when calculating the financial loss. A consequential loss is an insurance term for an income hit caused by a business's inability to use damaged property or equipment as usual. PML analytic assessments, as well as the amount of reinsurance ceded on a risk, often influence underwriting decisions. . Also, consider elements in your emergency action plan that address emergency reporting procedures and policies for protecting business assets. On Hypothetically; one of your day trading strategies generates an entry signal approximately 3 times a day, which equates to 720 trades per trading year (35 (Mon-Fri) x48 (Trading Weeks A year, Allowing for weekends & Holidays). List Price: $129.00, Wiley Online Library. A risk analysis will need to be performed to determine the scale at which the risk mitigating factors willreduce the probability of an event that would lead to damage or loss of the property. Commercial insurance underwriters use probable maximum loss (PML) calculations to estimate the highest maximum claim that a business most likely will file, versus what it could file, for damages resulting from a catastrophic event. "Guidelines on Business Interruption." Here are the basic steps: 1. https://abi.bcis.co.uk/about_building_insurance/about.aspx, Limit the Use of My Sensitive Personal Information. It is assumed that fire damage will be limited only by the structural features of the buildings, such as blank, free-standing firewalls or adequate distances between buildings. If you already have business property insurance, this is the amount of insurance coverage. Maximum Foreseeable Loss is defined as the largest loss, excluding a catastrophe loss, which is to be expected at a given site, assuming that the primary protection systems are either impaired or activated only after a delay. The normal loss expectancy assumes that all of the safeguards worked correctly, and the damage is limited to 10% of the insured value of the property. B. I. For insurance companies, the probable maximum loss is an important metric.