Discover Maximum probable loss (MPL)
Maximum probable loss (MPL) Technical Terms
Maximum probable loss (MPL): A term used in property insurance. It represents an estimate of the likely loss to be experienced in a “worst case” scenario, excluding catastrophe events. Some definitions assume that all fire fighting equipment, structural fire protection (e.g. fire doors) and alarms for a particular risk will fail. Other definitions assume that these items will function normally. Insurers use MPL definitions in order to arrange their reinsurance and decide how much of a risk they can retain. It also applies in reinsurance. Companies calculate estimates of the maximum probable loss they could get out of a disaster—e.g. bushfire, storm, earthquake—and buy an appropriate amount of reinsurance.