DEFINITION of 'Catastrophe Excess Reinsurance'

Insurance for catastrophe insurers. Because of the unpredictable nature of catastrophes, the large amount of damage they cause and the high number of insurance claims that occur as a result, a catastrophe insurance company faces a significant risk of its business going under.

To mitigate this risk, catastrophe insurers rely on catastrophe excess reinsurance. The reinsurance company accepts a portion of the potential obligation in exchange for a share of the insurance premium.

BREAKING DOWN 'Catastrophe Excess Reinsurance'

In the absence of catastrophe excess reinsurance, insurers may restrict new business or refuse to renew existing policies after a catastrophe. Thus, catastrophe excess reinsurance benefits not only catastrophe insurance companies (by helping them to stay in business) but the market as a whole (by making catastrophe insurance more widely available).

RELATED TERMS
  1. Catastrophe Loss Index - CLI

    An index used in the insurance industry to quantify the magnitude ...
  2. Catastrophe Insurance

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

    A customizable financial instrument traded in the over-the-counter ...
  4. Workers' Compensation Catastrophe ...

    A type of loss reinsurance that is purchased by insurers of workers' ...
  5. Catastrophic Health Insurance

    Affordable Care Act-compliant medical coverage open to people ...
  6. Catastrophe Call

    A call provision in municipal bonds that allows for the early ...
Related Articles
  1. Investing

    Elements of Insurable Risks: A Quick Guide

    Explore the elements of insurable risk: due to chance, measurable and definite, predictability, noncatastrophic, random selection and large loss exposure.
  2. Insurance

    Is Catastrophic Health Insurance Right for You?

    Catastrophic health plans protect you from high medical costs if you get seriously hurt or injured. But when is catastrophic the best option for you?
  3. Insurance

    How Catastrophic Health Insurance Works

    Catastrophic health insurance is open to people under 30 and those who qualify by income under the Affordable Care Act. But how exactly does it work?
  4. Insurance

    Insurance, Excess Insurance and Reinsurance: What's the Difference? (ALL)

    Understanding the differences might help you avoid being overinsured or underinsured.
  5. Investing

    5 Reinsurance Stocks To Watch

    Due to the decline in the reinsurance sector, many stocks within the sector are now trading at historic lows relative to book value. For investors, the time may be right to pounce on the values. ...
  6. Tech

    The Reinsurance Industry: An Inside Look (BRK.A)

    Warren Buffett has a major influence on the global reinsurance market, which has seen momentum in 2016 for higher revenue.
  7. Insurance

    Homeowners Insurance Losers: States That Pay Most

    Which states charge you the most for homeowner's insurance? Hint: They're regularly featured on the Weather Channel.
  8. Insurance

    Facultative vs. Treaty Reinsurance: Differences and Examples

    Reinsurance companies offer insurance to other insurers in case the traditional insurer does not have enough money to pay claims against its written policies.
  9. Tech

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.
RELATED FAQS
  1. What is Warren Buffett's relation to "Supercat" insurance?

    Understand the concept of catastrophe reinsurance and learn how Berkshire Hathaway makes billions providing such insurance ... Read Answer >>
  2. Why do growth investors buy insurance stocks?

    Discover why growth investors buy insurance stocks; these stocks are tied to major secular trends such as rising costs and ... Read Answer >>
  3. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  4. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
Hot Definitions
  1. Covariance

    A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
  2. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  3. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  4. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  5. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  6. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
Trading Center