What Does Maximum Probable Loss Mean?
The maximum probable loss is the largest loss that an insurance policyholder can expect to experience if a certain event occurred, such as a fire.
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.
Insuranceopedia Explains Maximum Probable Loss
It is important for insurance companies to be aware of the maximum probable losses for their insurance policies because these figures inform them of how much they stand to lose for each policy. If an insurance company calculates that the maximum probable loss for a particular asset is too high, they may decide not to insure the asset or renew the policy after it expires to ensure their profitability.