👉 Liability math involves calculating the potential financial exposure an organization might face due to legal claims or damages. It's a critical component of risk management, where actuaries and financial analysts use statistical models to estimate the probability and severity of potential liabilities. This process typically includes identifying possible legal scenarios, quantifying their financial impact, and determining the probability of each scenario occurring. By combining these elements, liability math helps organizations set aside adequate reserves, price insurance policies, and make informed decisions to mitigate risks. The goal is to ensure that the organization can cover its potential losses without compromising its financial stability, while also complying with regulatory requirements.
