Catastrophe Accumulation

Categories: Insurance

The X-Men member Storm is one of the most dangerous characters in the franchise. Catch her on a bad day, and she’s firing off hail storms, hurricanes, tornadoes, and hurricanes across vast areas of the world. She’s accumulated all the power to unleash catastrophe at every corner.

Of course, insurance agents think they have special powers too, like the ability to collect premiums forever and meet every obligation if a natural disaster strikes. But to insurance companies, catastrophe accumulation is what it would cost them to cover the total losses should Storm, or Mother Nature, leave widespread destruction in her path.

Example.

A hurricane levels a small town in Florida. Insurance and reinsurance companies, calculating the total damage across all policy claims, refer to the total losses across a specific region hit by that natural disaster.

Natural disasters are typically rare. However, insurance companies will buy something called catastrophe reinsurance to shift a lot of the costs if there's a significant event.

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