Catastrophe Loss Index - CLI

AAA

DEFINITION of 'Catastrophe Loss Index - CLI'

An index used in the insurance industry to quantify the magnitude of insurance claims expected from major disasters. Catastrophe loss indexes are created by third party firms that research natural disasters and work to provide estimates of the amount of losses from each catastrophe. The catastrophe loss index (CLI) is often used by insurance companies to supplement or check their internal efforts to estimate the company's expected claims from each catastrophe.

INVESTOPEDIA EXPLAINS 'Catastrophe Loss Index - CLI'

These indexes help with setting aside reserves for potential claims, as well as determining where or when to send out insurance adjusters to verify insurance claims. CLIs are also used as the underlying basis for a variety of derivative securities and catastrophe bonds. Securitization of catastrophic loss risks allows insurance companies to hedge against large disasters, such as hurricanes, which might otherwise threaten to deplete an insurance company's reserves.

RELATED TERMS
  1. Catastrophe Hazard

    The risk of loss from a particularly destructive event, such ...
  2. Catastrophe Insurance

    Insurance to protect businesses and residences against natural ...
  3. Catastrophe Futures

    Catastrophe futures are futures contracts traded on the Chicago ...
  4. Catastrophe Bond - CAT

    A high-yield debt instrument that is usually insurance linked ...
  5. Catastrophe Call

    A call provision in municipal bonds that allows for the early ...
  6. Investment Income Ratio

    The ratio of an insurance company’s net investment income to ...
Related Articles
  1. Taxes

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  2. Home & Auto

    5 Investment Risks Created By Global Warming

    Climate-change deniers and believers alike would be wise to prepare for the worst.
  3. Insurance

    Event-Linked Bonds: Competing Against A Catastrophe

    These debt instruments can blow new wind into your portfolio, but only if you can handle the risk.
  4. Personal Finance

    The Financial Effects Of A Natural Disaster

    Despite advances in building and infrastructure, we're all subject to Mother Nature's whims - and the damage can have far-reaching effects.
  5. Insurance

    5 Jobs That Cash In On Disasters

    Disasters just happen, but there are many businesses that are able to make the best of them.
  6. Options & Futures

    Introduction To Weather Derivatives

    Learn about a financial instrument that makes temperature a tradable commodity.
  7. Fundamental Analysis

    The Economics Of Natural Disasters

    Even natural disasters that take place thousands of miles away can shake up your portfolio here at home.
  8. Fundamental Analysis

    A Disaster-Protection Plan For Your Portfolio

    If you can't predict the future, you'll need to plan ahead to protect your assets from the impact of major world events.
  9. Trading Strategies

    Is using the Donchian channel more risky or more conservative than using Bollinger Bands®?

    Read about differences between Bollinger Bands and Donchian Channels, and learn why the latter are considered to be a riskier trading tool.
  10. Investing

    What are the risks associated with investing in telecommunication stocks

    Read about some of the risks associated with investing in telecommunication stocks, including several that are specific to the telecom industry.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center