Which financial concept relates to the expected cost of losses in insurance?

The concept that directly relates to the expected cost of losses in insurance is actuarial science. This field encompasses the use of mathematical and statistical methods to assess risk and uncertainty in insurance and finance, specifically focusing on predicting future events such as accidents, illnesses, or natural disasters that could lead to financial loss. Actuaries analyze data to estimate the likelihood of these events occurring and the associated costs, allowing insurance companies to set premiums that reflect the potential losses while ensuring financial stability.

In contrast, while concepts like risk management and loss mitigation are essential in the insurance industry, they focus on strategies to manage, reduce, or eliminate risks rather than directly calculating or predicting the expected costs of losses. Price elasticity, on the other hand, is a concept more applicable to economics and market behavior rather than the specific financial calculations related to insurance losses. Thus, actuarial science is the most appropriate choice in understanding the expected cost of losses in the context of insurance.