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.

BREAKING DOWN '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. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
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. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  10. Savings

    What Women Investors Are Doing Right

    Women's risk aversion, penchant for research – and lack of male-style "irrational exuberance" – means their investing strategies often put them ahead.
RELATED FAQS
  1. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  2. Is my IRA/Roth IRA FDIC-Insured?

    The Federal Deposit Insurance Corporation, or FDIC, is a government-run agency that provides protection against losses if ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What are common delta hedging strategies?

    The term delta refers to the change in price of an underlying stock or exchange-traded fund (ETF) as compared to the corresponding ... Read Full Answer >>
  5. How does being overweight in a particular sector increase risk to a portfolio?

    An investor who is overweight in a particular sector risks a loss in value for the portfolio if there is a downturn in that ... Read Full Answer >>
  6. What are the primary risks an investor should consider when investing in the retail ...

    The retail sector consists of companies operating in multiple industries such as specialty retail, general retail, food and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!