Options traded on the Chicago Board of Trade (CBOT) and the Bermuda Commodities Exchange (BCOE) the value of which is linked to the occurrence of defined losses caused by natural disasters.
Insurance Encyclopedia
Catastrophe or Per Event Covers
Which protect a Company against very large losses caused by events like conflagrations, cyclone, floods etc. The distinction between a ‘per event’ cover and a ‘per risk’ cover is that in the former, the loss may cover one or more than one risk, but when it affects more than one risk, it should have arisen from one event. See Also: “Per risk or working cover.”
Catastrophe Policy
An older name for Major Medical Expenses Policy. This Policy is to pay all medical or hospital costs above a certain deductible amount and up to the maximum provided in the Policy. The term catastrophe as applied to them is in reference to the economic catastrophe of huge medical expenses. It is not related to catastrophe as used in catastrophe hazard.
Catastrophe Reinsurance
REINSURANCE: A form of excess of loss reinsurance which, subject to a specific limit, indemnifies the ceding company in excess of a specified retention with respect to an accumulation of losses to multiple insureds and/or policies resulting from an occurrence or series of occurrences arising from one or more disasters
***
A form of reinsurance that indemnifies the ceding company for the accumulation of losses in excess of a stipulated sum arising from a single catastrophic event or series of events.
***
UK: An excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured for the amount of loss in excess of a specified retention, the excess point, with regard to an accumulation of losses caused by a catastrophic event (e.g. a hurricane) or series of events. The reinsurance document is referred to as a catastrophe cover. See HOURS CLAUSE.
Catastrophe reserves
A reserve created by an insurer as a safeguard against exceptionally poor claims experience. The reserve is created out of prudence and not in pursuance of regulatory requirements. The term is used colloquially.
Catastrophe Risk (CAT)
Cat risk can be caused by natural catastrophes, such as hurricanes in the US, storms or floods in the UK/Europe, and earthquakes in Japan, or manmade catastrophes, such as a big potential volatile risk like cyber or the pandemic.
Catastrophe securitisation
See: Catastrophe Bonds.
Catastrophe swaps
A reinsurer swaps part of his portfolio, e.g. earthquake in Japan, with the Florida hurricane exposure of another reinsurer, each wishing to diversify his or her portfolio. The term also describes an arrangement between an insurer and an investor. The insurer agrees to make periodic payments to another party who agrees to make payments to the insurer if defined catastrophes occur, but there is no exchange of principal. See WEATHER SWAPS.
Catastrophic
Term that refers to an illness that has the potential to financially ruin an individual or his or her family because of the high cost of medical care.
Catastrophic cap
Maximum dollar amount that an active-duty family member has to pay out of their pocket under TRICARE for covered medical services in any fiscal year or enrollment period.