What is PML in Real Estate?

In real estate, PML stands for Probable Maximum Loss. It is an estimate of the maximum expected damage or loss to a property from an earthquake, expressed as a percentage of the property's total replacement cost.

PML is used by lenders, investors, and insurers to evaluate seismic risk and decide whether to finance or insure a property. A lower PML indicates a more resilient building, while a higher PML may require seismic retrofitting or impact loan terms.

It’s typically determined through a seismic risk assessment conducted by a structural engineer or third-party risk firm.