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🌪️ '''Aggregation risk''' is the exposure an [[Definition:Insurance carrier | insurer]] or [[Definition:Reinsurer | reinsurer]] faces when a single event or a closely correlated set of events triggers [[Definition:Insurance claim | claims]] across many [[Definition:Insurance policy | policies]] simultaneously. A hurricane making landfall over a densely insured coastal city, a widespread [[Definition:Cyber incident | cyber attack]] exploiting a common software vulnerability, or a systemic [[Definition:Product liability | product defect]] can each generate losses that, individually, appear manageable but in the aggregate threaten an organization's [[Definition:Solvency | solvency]].

🗺️ Managing this exposure starts with identifying where concentrations exist. [[Definition:Catastrophe modeling | Catastrophe models]] map the geographic and economic footprint of natural perils, while [[Definition:Accumulation management | accumulation monitoring]] systems track how much [[Definition:Total insured value (TIV) | total insured value]] sits within defined zones or depends on shared infrastructure. For non-catastrophe lines — [[Definition:Cyber insurance | cyber]], [[Definition:Directors and officers liability insurance (D&O) | D&O]], or [[Definition:Professional liability insurance | professional liability]] — the correlation mechanisms are often less visible, requiring scenario-based stress tests rather than purely geographic analysis. Outputs from these tools feed into [[Definition:Reinsurance | reinsurance]] purchasing decisions and [[Definition:Capital allocation | capital allocation]] frameworks.

📈 Recent years have underscored how aggregation risk extends well beyond natural disasters. The COVID-19 pandemic produced correlated [[Definition:Business interruption insurance | business interruption]] and [[Definition:Event cancellation insurance | event cancellation]] claims worldwide, while growing reliance on a handful of cloud providers has raised concerns about [[Definition:Systemic risk | systemic]] cyber accumulation. For carriers and [[Definition:Insurance regulator | regulators]] alike, the ability to detect hidden correlations and size potential aggregate losses accurately is becoming a defining competency — one that separates well-managed [[Definition:Balance sheet | balance sheets]] from those vulnerable to tail events.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe modeling]]
* [[Definition:Accumulation management]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Systemic risk]]
* [[Definition:Reinsurance]]
* [[Definition:Concentration risk]]
{{Div col end}}

Definition:Aggregation risk - Revision history

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