Maximum Foreseeable Loss
Categories: Accounting
Regular folks might say “worst case scenario.” Insurance types say “maximum foreseeable loss.” Wry hipsters mumble, "Murphy's Law."
It comes up most in business insurance. It describes the biggest payout the insurer might get stuck with should things go terribly wrong. Like...a meteor hits the client’s factory during a hurricane while a herd of feral pigs run wild in the facility.
It provides the insurance company with a projection of how much it would have to pay out in the most extreme situation. From there, the company can figure out probabilities, and use that information to price the policy properly.