Catastrophe Losses
Claims from large, infrequent, geographically concentrated events -- hurricanes, wildfires, earthquakes, severe convective storms -- that an insurer breaks out separately because they are lumpy and distort the underlying trend. Reported in dollars (and as a contribution to the combined ratio in points), cat losses are the single biggest source of quarter-to-quarter earnings volatility for a P&C insurer. Analysts strip them out to see the underlying loss ratio, but they are a real and recurring cost of the business; an insurer that consistently underprices catastrophe risk will eventually be exposed by a bad year.
Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Assets Under Management
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