Catastrophe Reinsurance

Reinsurance (insurance for insurers) for catastrophic losses.

The insurance industry is able to absorb the multibillion dollar losses caused by natural and man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread among thousands of companies including catastrophe reinsurers who operate on a global basis.

Insurers’ ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance.After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume.

In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.

A form of reinsurance that indemnifies the Ceding Company for the accumulation of losses in excess of a stipulated sum arising from a catastrophic event such as conflagration, earthquake or windstorm.

Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event.