Reply To: Catastrophe Reinsurance
tanmay
Catastrophe excess reinsurance protects catastrophe insurers from financial ruin in the event of a large-scale natural disaster.
Catastrophe excess reinsurance protects insurance companies from the financial risks involved in large-scale catastrophic events. The size and unpredictability of catastrophes force insurers take on a tremendous amount of risk. Although catastrophic events happen infrequently, when they do happen they tend to cover wide geographic areas and cause large amounts of damage. When an insurer encounters a large number of claims all at once, the losses potentially could cause it to restrict new business or cause it to refuse to renew existing policies, limiting its ability to recover.
That is a nice understanding. I would also say that XOL is generally preferred in this case and that too with lots of lines covering 100% of excess of particular amount.