Probable Maximum Loss
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Probable maximum loss (PML)
The anticipated maximum property fire loss that could result, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others), as opposed to maximum foreseeable loss which is a similar valuation, but on a worst-case basis with respect to the functioning of the protective features, i.e. assuming failure of all protective features. Underwriting decisions would typically be influenced by PML evaluations, and the amount of reinsurance ceded on a risk would normally be predicated on the PML valuation.
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The various scenarios of possible loss in one fire incidence, simultaneously failures of protection devices which are usually sure to fail. Fail safe practices. Integration of blocks with induced effect fires, water damage during fighting fire. Normal observation in developed proerty, is that the fire water is serious cause of avoidable loss. explosion in furnace, spantaneous combustion in coal, malicious damage in strikes, lightening, storms, choked drains are some considerations. Each has its own hypothesis.
