Insurance is a form of risk management. It is a promise of compensation from the insurer to the policy holder for specific future losses in exchange for a regular payment. It is designed to protect the individual, business or organization from an unexpected loss and secure their financial well-being.
Some of the most extreme cases of financial loss to individuals, businesses and whole regions result from natural catastrophes. In 2017, the insured losses worldwide reached approximately 144.31 billion U.S. dollars. Weather related losses cost the insurance industry 136.44 billion U.S. dollars, man-made disasters cost 6.25 billion U.S. dollars and earthquakes cost 1.62 billion U.S. dollars.
The earthquake most expensive to the insurance industry since 1980, took place in Japan in March 2011. The total losses were estimated to be 210 billion U.S. dollars while only 40 billion U.S. dollars were insured. The most costly global tropical cyclone occurred in the United States in 2017. Hurricane Harvey incurred 95 billion U.S. dollars of total losses, out of which only 30 million U.S. dollars were insured. The most costly insurance loss worldwide resulting from a natural disaster since 1970 amounted to 82.39 billion U.S. dollars and was caused by Hurricane Katrina, which hit the United States in 2005.
Man-made insured losses are those caused by fires and explosions, mining accidents, aviation, maritime or rail disasters. In 2017, major fires and explosions worldwide cost the insurance industry approximately 5.44 billion U.S. dollars and were the most significant insured loss among the mentioned categories.
The most costly terrorist attack took place in the United States in 2001. The insured property loss resulting from the crash of hijacked airplanes into World Trade Center and Pentagon, which is generally referred to as 9/11, amounted to 26.22 billion U.S. dollars.
This text provides general information. Statista assumes no liability for the information given being complete or correct. Due to varying update cycles, statistics can display more up-to-date data than referenced in the text.
FAQs
The insured portion was $125 billion in 2022, up from $121 billion in 2021 and above the 10-year average of $81 billion. According to the National Oceanic and Atmospheric Administration (NOAA), in 2022 there were 18 weather/climate disaster events in the United States with losses exceeding $1 billion each.
What are catastrophe losses in insurance? ›
Catastrophes, as defined in the insurance industry, refer to severe disasters for which claims are expected to reach a high dollar value. Catastrophic losses are of critical concern for many as entire families' lives are completely upended by destruction, leaving their financial situation completely in question.
What is an example of a catastrophic loss? ›
Examples include but are not limited to: A major fire that makes the home uninhabitable or a flood that causes foundation damage.
What does insurance consider a catastrophe? ›
In the insurance world, a catastrophe is a natural or human-created disaster that impacts many policyholders and providers at the same time and where claims are expected to reach a specific dollar amount. These events may not happen very often, but they cause considerable damage when they do.
What is a catastrophic loss claim? ›
You might think that any storm damage claim counts as a catatrophe, but a catastrophe claim refers to single-event, widespread losses expected to be more than $25 million.
What is an example of a catastrophe? ›
A hurricane destroying hundreds of homes is certainly a catastrophe; baking a birthday cake without following a recipe might also result in catastrophe, if you don't know anything about cooking. Definitions of catastrophe. noun. a sudden violent change in the earth's surface. synonyms: cataclysm.
How do you deal with catastrophic loss? ›
Talk with someone about your feelings - anger, sorrow and other emotions - even though it may be difficult. Seek help from professional counselors who deal with post-disaster stress. Do not hold yourself responsible for the disastrous event or be frustrated because you feel you cannot help directly in the rescue work.
What is the catastrophic loss limit? ›
From 2018 through 2025, the TCJA provides that the deduction is limited to losses that result from federally declared disasters. Under permanent law, taxpayers can only deduct such losses to the extent each loss exceeds $100, and their total exceeds 10% of the taxpayer's adjusted gross income (AGI).
What is an example of catastrophe excess of loss? ›
Example of Catastrophe Excess Reinsurance
Suppose a disaster incurred $2 million in claims. A reinsurance contract covering all claims over the threshold would pay out $1 million. A reinsurance contract for 50 percent of claims above the threshold would pay $1.5 million.
How does catastrophic insurance work? ›
Catastrophic health insurance plans have low monthly premiums and very high deductibles. They may be an affordable way to protect yourself from worst-case scenarios, like getting seriously sick or injured. But you pay most routine medical expenses yourself.
Individual insurance companies may declare a "catastrophe" based on the anticipated loss to their policyholders in the impacted area.
What is the catastrophe clause in insurance? ›
Catastrophe insurance protects businesses and residences against natural disasters, such as earthquakes and floods, and against human-made disasters. Windstorm insurance is a special type of property-casualty insurance that protects policyholders from property damage caused by gusty events.
What is the difference between an accident and a catastrophe? ›
No matter the size of an accident or disaster, it surely feels like a catastrophe to the individuals affected. But catastrophe, as used by the Center for Disaster Philanthropy, references a specific type of disaster – one that is extremely large and is outside the coping ability of a community.
How do insurers deal with catastrophic loss? ›
The insurers reduce the possibility of incurring heavy losses by purchasing reinsurance. The mechanism works as follows: Primary insurance company pays a premium to purchase a Catastrophe Reinsurance contract from Reinsurance Company.
What is an example of a catastrophic event? ›
Catastrophic weather events include hurricanes, tornadoes, blizzards, and droughts, among others. As these massively destructive and costly events become more frequent, scientific evidence points to climate change as a leading cause.
What is considered catastrophic damage? ›
Medically speaking, a catastrophic injury is one that leaves a person: In need of life-long care or special accommodations. With a permanent disability. Severely disfigured, deformed or scarred.
What are the 2 types of losses in insurance? ›
There are several types of insurances available to protect businesses and individuals against loss and damages. Insurances break down and fall into one of two categories—they either protect against direct losses or protect against indirect losses.
