Catastrophe Insurance
Reinsurance for catastrophic losses. The insurance industry is able to absorb the multi-billion dollar losses caused by natural 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. Insurer’s ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance. After major disasters, such as Hurricane Katrina 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.