US: A severe loss characterized by extreme force and/or sizable financial loss. Often abbreviated to “cat.”
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A sudden and severe calamity or disaster. A single event which causes a loss of extraordinary large amount. The exact definition may vary occasionally and is usually dependent on policy contract wordings e.g., it might mean all losses, in a 72 hours period, arising from a wind storm.
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A sudden and widespread disaster. FEMA definition: “… Any natural or manmade incident, including terrorism, that results in extraordinary levels of mass casualties, damage or disruption severely affecting the population, infrastructure, environment, economy, national morale, and or government functions. Compared to disaster, in a catastrophe most or all of the community built structure is heavily impacted; most, if not all, of the everyday community functions are sharply and simultaneously interrupted and help from nearby communities cannot be provided.
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UK: an event leading to substantial losses, such as an explosion, hurricane or earthquake.
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“Catastrophe is a statistical term that refers to a single event or a series of closely related events that causes property losses of more than a certain amount, currently $25 million. Examples of catastrophes are World Trade Center terrorist attack and Hurricane Katrina. The probability of a catastrophe is known as the catastrophe factor. It is based on the total number of catastrophes in a given geographic area over a 40-year period. Insurance companies have several methods to financepotential catastrophes: catastrophe bonds, catastrophe deductible, and catastrophe reinsurance. Each is discussed below.
Catastrophe Bond
Also known as “”cat”” bonds and “”event-linked securities,”” these bonds are issued by a “”sponsor”” (usually an insurance or reinsurance company) in order to transfer some or all of the risk of a catastrophic loss. The purchaser of the catastrophe bonds receives regular interest payments for the term of the bond and the principal when the bond matures. However, a catastrophic event occurs, the insurance company uses the bond principal to pay losses and the bondholder receives nothing. Because of the relatively high potential for loss of principal, these bonds often pay a high rate of interest.
Catastrophe Deductible
Property owners in areas with a high probability of catastrophes often have a higher deductible for catastrophic events. For example, a homeowner in an area susceptible to hurricanes may have a $500 deductible for most insured events but a $10,000 deductible for hurricanes. The catastrophe deductible allows insurance companies to write more insurance in these areas.
Catastrophe Reinsurance
This reinsurance is designed to absorb the large losses caused by hurricanes, earthquakes, and terrorist attacks. Losses are spread among thousands of insurers that operate around the globe.”
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US: Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.
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MEDICAL,USA: Single incident or many related incidents that cause property loss to insureds.
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UK: The possibility of exceptionally heavy loss due to an occurrence, often of short duration, e.g. Hurricane Betsey. Most occurrences are natural disasters, but certain ‘catastrophic events, e.g. downfall of Barings Bank, have been man-made. See CATASTROPHE BONDS; CATASTROPHE EXCESS OF LOSS.