Catastrophe Loss Index - CLI


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.

  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. Equity Risk Premium

    The excess return that investing in the stock market provides ...
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. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  10. Mutual Funds & ETFs

    3 Fixed Income ETFs in the Mining Sector

    Learn about the top three metals and mining exchange-traded funds (ETFs), and explore analyses of their characteristics and how investors can benefit from these ETFs.
  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. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  3. Can your car insurance company check your driving record?

    While your auto insurance company cannot pull your full motor vehicle report, or MVR, it does pull a record summary that ... Read Full Answer >>
  4. What is the difference between a peril and a hazard?

    The two related terms "peril" and "hazard" are often used in reference to the insurance industry. Essentially, a peril is ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
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!