Interesting post in Specialty Insurance Blog about mega-cats, i.e., catastrophes so large the insurance industry can’t insure them, at least not without losing many small insurance companies.

There have been and will continue to be large scale disasters that the insurance industry is entirely capable of absorbing, including significant levels of terrorism and hurricane losses, as has been demonstrated with the events of 9/11 and the most recent hurricanes. What needs to be the focus of the discussions is the level of exposure that is above the insurance industry’s capacity, such as the mega-cat hurricanes (see here) hitting the most exposed areas that the experts are concerned about. There has not been much distinction between these exceedingly rare events and other catastrophes that the insurance industry can absorb – but may not want to.

Hurricanes Insurable? 8 June 2006

And of course there’s the question of whether mega-cats will remain exceedingly rare or whether with climate change they will become more frequent.

-jsq