Which of the following best describes the connection between loss runs and risk assessment?

The connection between loss runs and risk assessment is best described by stating that loss runs provide historical claims data for risk evaluation. Loss runs are essentially reports that compile a history of claims made by an insured party over a specific period. This information is invaluable when assessing risk because it gives insurers and brokers insights into past incidents, frequency of claims, and severity of losses.

Analyzing historical claims data helps in understanding trends, identifying potential risk factors, and estimating future insurance costs or premiums. Insurers can gauge how likely it is for similar claims to occur again, and thus, make informed decisions based on the client's claim history. This allows for a more accurate risk assessment compared to merely relying on general market conditions or assumptions about a business's operations.

In contrast to this, the other choices do not accurately represent the role of loss runs in risk assessment. They either underestimate the importance of claims data or suggest that loss runs have a narrow application. This highlights the critical role that loss runs play in not just understanding a company’s past but also forecasting their potential risk profile moving forward.