Catastrophe Insurance


DEFINITION of 'Catastrophe Insurance'

Insurance to protect businesses and residences against natural disasters such as earthquakes, floods and hurricanes, and against man-made disasters such as terrorist attacks. These low-probability, high-cost events are generally excluded from standard hazard insurance policies, and so catastrophe insurance is required.

BREAKING DOWN 'Catastrophe Insurance'

Catastrophe insurance is different from other types of insurance in that it is difficult to estimate the total potential cost of an insured loss and a catastrophic event results in an extremely large number of claims being filed at the same time. This makes it difficult for catastrophe insurance issuers to effectively manage risk. Reinsurance and retrocession are used along with catastrophe insurance to manage catastrophe risk.

  1. Catastrophe Loss Index - CLI

    An index used in the insurance industry to quantify the magnitude ...
  2. Water Exclusion Clause

    A restriction in a homeowner's or renter's insurance policy that ...
  3. Disaster Relief Act

    A United States federal law passed in 1974 that laid down the ...
  4. Fire Insurance

    Insurance that is used to cover damage to a property caused by ...
  5. Hazard Insurance

    Insurance that protects a property owner against damage caused ...
  6. Catastrophe Bond - CAT

    A high-yield debt instrument that is usually insurance linked ...
Related Articles
  1. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  2. Home & Auto

    The History Of Insurance

    The first written policy appeared in Hammurabi's Code. Find out how it evolved from there.
  3. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  4. Home & Auto

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  5. Home & Auto

    When Things Go Awry, Insurers Get Reinsured

    Guru Warren Buffett is making this sector popular. Learn more here.
  6. Insurance

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  7. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  8. Insurance

    How Does Dental Insurance Work?

    Learn how dental insurance policies work and what to look for when comparing policies so you are not surprised with unexpected bills.
  9. Home & Auto

    Make This The Year You Get Vacation Insurance

    With a few simple policy additions you can protect your holiday plans from being ruined.
  10. Personal Finance

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  1. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  2. Does renters insurance cover storage units?

    An all-perils renters insurance policy provides coverage for the contents of storage units. Most policies limit the amount ... Read Full Answer >>
  3. Does renters insurance cover personal injuries?

    Renters insurance provides two main forms of coverage – liability and contents insurance – and they are offered together ... Read Full Answer >>
  4. Does renters insurance cover flooding?

    An all-perils renters insurance policy does not cover damage from a flood. Consumers sometimes confuse a pipe bursting with ... Read Full Answer >>
  5. Does renters insurance cover mold?

    An all-perils renters insurance policy typically provides a low set amount of coverage for damage caused by mold as long ... Read Full Answer >>
  6. Does renters insurance cover car theft?

    An all-perils renters insurance policy does not cover the theft of a vehicle. It does, however, provide coverage for personal ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center