Risk Pool

A risk pool is a group of individuals or entities whose risks are combined to spread the potential financial impact of risk events. By pooling risks, participants reduce their individual exposure to large losses and can share the burden of unexpected costs. Risk pools are commonly used in insurance, where premiums from all policyholders contribute to a pool that covers the losses of those who experience claims. Risk pooling helps manage uncertainty and allows participants to benefit from collective risk-sharing.

Example

Health insurance providers use risk pools to spread the cost of medical claims across a large group of policyholders, reducing the financial impact on any single individual.