Catastrophe hazard describes severe perils, such as storms or systemic failures, that can cause losses beyond normal policy assumptions.
Underwriting importance
Insurers treat catastrophe hazards as drivers of catastrophe models, deductibles, aggregate limits, and catastrophe exclusions.
Claims and reserve impact
Higher catastrophe hazard increases catastrophe-loss volatility, which affects reserve methodology and capital allocation for severe seasons.
Practical example
Two coastal facilities with similar business size can still have very different hazard profiles due to elevation, distance to shore, and historical event frequency. These differences produce different pricing and structural controls.