Which term refers to the combination of potential losses an insurance company faces?

The correct term that refers to the combination of potential losses an insurance company faces is policy exposure. This term encapsulates the risks associated with the total amount of insurance policies that a company has underwritten. Policy exposure considers various factors such as the type of coverage, the nature of the insured risks, and the overall concentration of risks.

Understanding policy exposure is critical for insurance companies as it influences their pricing, risk management strategies, and overall financial stability. This collective assessment of potential losses assists insurers in determining the appropriate reserves to maintain and enables them to address any looming financial impact from claims that may arise.

Other terms like underwriting risk, insurance liability, and claim exposure have specific meanings related to the insurance industry, but they do not encompass the broader concept of potential losses from all policies combined in the same manner that policy exposure does. Underwriting risk specifically pertains to the risk an insurer assumes from issuing policies, while insurance liability refers to the insurer's legal obligation to compensate policyholders for valid claims. Claim exposure deals with the anticipated volume of claims that may be filed.