Catastrophe Excess Reinsurance

You own an insurance company that offers hurricane insurance. A major storm just hit a strip of coastline that includes a lot of your customers. The damage is likely to be extremely high, and the number of claims you'd have to pay out could have sent you into insolvency. Luckily, you thought ahead. You bought Catastrophe Excess Reinsurance.

In essence, you got what amounts to a very high-deductible insurance policy with another firm. They became your backstop in just this scenario. If the amount of claims you have to pay out gets too high, the reinsurance will step in and make sure that you can meet your obligations and keep your doors open.