The Insurance Companies have actuaries who are specialists in their field. (See actuaries in the glossary for a complete description.)  One of the calculations the actuaries will make is called the Estimated Maximum Loss (E.M.L.) It is also known as the Maximum Probable Loss (M.P.L.)

The insurance company needs to know what their total exposure is in terms of all of the insured perils. An insurance company taking on car insurance needs to calculate the maximum probable loss in case of fire, theft, accident and any other peril they have provided cover for.

Insurance companies need these figures for a number of reasons:

• They need to calculate their capacity to protect their solvency margins. Capacity is basically the limit to the extent that insurance companies can expose themselves to possible losses. (See capacity in the glossary for further details.)
• They must take out re-insurance for the amount exceeding their capacity.
• The E.M.L. figures help in the calculation of risk profiles.
• The E.M.L. figures are also used when calculating individual car insurance premiums – the higher the value of your car, the higher the Estimated Maximum Loss will be and the higher your insurance premium will be.