Definition of the law of large numbers.

This actuarial principle states that as the number of exposure units increases, actual losses will more closely match expected losses.

Why insurers rely on this law.

It allows insurers to:

Set accurate premiums

Maintain solvency

Spread risk efficiently

Evaluate each option.

A. Predictability is impaired

Incorrect; predictability improves.

B. Individual losses predicted

Incorrect; only group results are predictable.

C. Predictability improves

Correct.

D. Number of losses decreases

Incorrect; frequency does not necessarily decline.

Maryland solvency oversight relevance.

The Maryland Insurance Administration relies on actuarial predictability to ensure insurers remain financially sound.

Conclusion.

Increasing similar exposure units improves predictability of losses.