Catastrophes

This chapter is about catastrophes. We could equally use the word disaster, but catastrophe is more frequently used in insurance. We will consider these terms in greater detail shortly, but we all will almost certainly agree on the characteristics of such events: that they are big or very big, they cause widespread harm, and are difficult to control and mediate. It might seem surprising that some of these events and situations (whether pandemics or the environmental instability of the earth) can be insured at all. As this chapter reveals, insurers apply many of the same principles to the insurance of catastrophes as they do elsewhere. Certainly, the insured cannot always get what they want—as we saw in the previous chapter in regards to flooding, insurance cannot be provided for any eventuality. There is a bottom line: for insurance to be sustainable and resilient, disasters cannot be disastrous for the industry itself. Yet, the fact that insurance is applied to large, complex events with high societal and commercial impact represents a further demonstration of the maturity and value of the insurance world, and reinforces its claim to be just as essential to modern life as a good legal system.