Risk pooling

Risk pooling is the economic and legal foundation of insurance. Many policyholders contribute premiums to a common pool from which covered losses are paid, allowing rare or uneven losses to be financed collectively. The technique depends on sufficiently similar or measurable risks, actuarial pricing, anti-selection controls, and rules on eligibility and exclusions. In Switzerland, risk pooling appears in private insurance as well as in mandatory social insurance systems, though the legal objectives differ. It must be balanced with non-discrimination rules, solidarity principles, and solvency requirements.