Inputs
Example Data Table
| Case | TIV | Method | Key Inputs | Net PML |
|---|---|---|---|---|
| Warehouse | USD 2,500,000 | Scenario | Affected 35%, Severity 0.80, sprinklers yes, deductible 25,000 | USD 675,000 |
| Office | USD 1,200,000 | Percent | PML 12%, deductible 10,000 | USD 134,000 |
| Retail | USD 900,000 | Hazard | Flood 0.35, Vulnerability 0.70, deductible 15,000 | USD 206,250 |
These examples are illustrative. Always validate inputs with site data and policy terms.
Formula Used
1) Percent of Total Insured Value
Base Loss = TIV × (PML% ÷ 100)
2) Scenario Method
Damage Factor = Severity − Safeguard Credits (bounded 0.10 to 1.00)
Base Loss = TIV × (Affected% ÷ 100) × Damage Factor
3) Natural Hazard Method
Base Loss = TIV × Hazard Factor × Vulnerability
Add-ons and Netting
BI Loss = Monthly Gross Profit × Months × BI Factor
Net PML = max(0, Base Loss + BI Loss − Deductible)
How to Use This Calculator
- Enter the Total Insured Value and deductible.
- Choose a method based on available information.
- Fill only the fields shown for that method.
- If needed, enable Business Interruption and add downtime.
- Click Calculate to see low, base, and high results.
Probable Maximum Loss: Practical Guide
1) What PML represents
PML estimates the largest loss that can reasonably occur from one major event at a location. It is not “total destruction,” and it is not a frequent loss. Underwriters use it to size limits, set deductibles, and decide where risk improvements matter.
2) Start with Total Insured Value
TIV should reflect rebuilding, replacement, and clean-up costs. Many portfolios split values into building, contents, and stock. If stock turns quickly, use peak-season values. A 10% valuation error can move PML estimates by the same order.
3) Typical screening percentages
Early stage assessments often apply a percentage of TIV. Offices with good separation may screen in the 5–15% range. Warehouses and light manufacturing may screen around 15–35% when a single fire area can involve large stock. These are starting points, not rules.
4) Affected share drives the scenario method
The scenario approach focuses on the maximum portion that could be involved: a single building, a fire compartment, or a process line. If the largest fire compartment holds 40% of TIV, then “Affected%” begins near 40%. Clear compartmentation can reduce this number more than small safety upgrades.
5) Severity and safeguards change outcomes
Severity reflects damage within the affected area. Sprinklers, early detection, and fire walls reduce spread and heat release, often lowering effective severity. In this calculator, safeguard selections reduce the damage factor while keeping it bounded so results stay realistic.
6) Natural hazards need location and construction context
Wind, flood, and earthquake losses depend on event intensity and vulnerability. Raised floor levels, flood barriers, and retrofits can reduce vulnerability. For hazards, it helps to compare multiple factor sets to see how sensitive the net PML is to assumptions.
7) Business interruption can exceed physical damage
BI estimates depend on monthly gross profit and downtime. A specialized plant may lose more from lost production than from repairs. Even four months of outage at 120,000 per month adds 480,000 before deductibles, demonstrating why BI inputs matter.
8) Use bands, then refine with real data
Low, base, and high estimates help compare sites consistently. If the band is wide, refine with better compartment maps, maintenance records, and protection testing. Treat results as decision support, then validate with engineering surveys and policy wording.
FAQs
1) Is PML the same as maximum possible loss?
No. Maximum possible loss assumes near total loss under extreme conditions. PML assumes a credible worst case, considering typical controls and realistic event development.
2) Which method should I choose?
Use Percent for quick screening, Scenario when you know the maximum involved portion, and Natural Hazard when the main driver is wind, flood, earthquake, or wildfire exposure.
3) Why does the calculator show low and high estimates?
Inputs are uncertain. The band gives a quick sensitivity view using ±10% on the gross loss drivers, helping you see how stable the result is before deeper analysis.
4) How should I pick the affected share?
Start with the largest compartment or building that could be involved in one event. Use separation, fire walls, and distance to justify a smaller share. If unsure, test several values.
5) How do safeguards affect the scenario result?
Sprinklers, detection, compartmentation, and housekeeping reduce the damage factor. This models lower spread and faster control, but the factor is bounded so results do not become unrealistically small.
6) Should deductibles be applied to BI as well?
It depends on policy wording. This tool subtracts the deductible from combined base and BI loss for simplicity. Adjust inputs or interpret results according to your specific policy terms.
7) Can I use this for regulatory reporting?
Use it for planning and comparison. For formal reporting, use documented engineering studies, verified valuations, and policy definitions of loss. Treat this calculator as a transparent estimator.