CAT Loss/ Catastrophic Loss

Whenever you read a research document or financial document of an insurance company you may spot a word “CAT Loss/ Catastrophic Loss”.

Catastrophic Loss:

The Loss which is incurred by the insurance company due to Natural disasters & Man made disasters is called as “CAT Loss/ Catastrophic Loss”. 

Catastrophe insurance:

Catastrophe insurance is Insurance to protect businesses and residences against natural disasters such as earthquakes, floods and hurricanes, and against man-made disasters such as terrorist   attacks. 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.