CAT claim - Catastrophe claim
What is a catastrophe claim: CAT claims explained
A catastrophe claim, shortened to CAT claim in daily use, is a claim arising from a single large event that damages a great many insured risks at the same time, such as a hurricane, wildfire, hailstorm, earthquake or flood. Insurers tag these claims to one catastrophe event code so their cost can be measured apart from normal claims.
For insurers
See the damage before you send anyone
Venta Capture, a product of VentaVid, sends the policyholder a link. They film the damage on their own phone, guided step by step, and the evidence lands with the claim.
The tag is the important part. A CAT claim is not a different kind of loss, it is an ordinary loss that belongs to an identified event, and the coding is what lets an insurer answer the question every reinsurer, regulator and board asks after a storm: what did that event cost us?
What does a catastrophe claim mean in practice?
Two things have to be true. There has to be a recognised catastrophe event, and the individual claim has to be attributable to it by date, peril and location.
Thresholds are set by the bodies that number events. The Insurance Information Institute publishes Aon's working definition: a natural event that causes 25 million US dollars or more in insured property losses, or 10 deaths, or 50 people injured, or 2,000 filed claims or damaged homes and structures. Property Claim Services has used a comparable 25 million dollar threshold in the US market since 1997, up from 5 million before that.
Below the threshold the same hailstorm produces attritional claims. Above it, the identical files are CAT claims, reserved against a catastrophe event, and recoverable under the property catastrophe reinsurance treaty once the retention is breached.
How a catastrophe event gets declared and numbered
- An event is identified and serialised: a numbering body assigns a catastrophe number, and every insurer in the market codes to the same event.
- The event gets a window: a start and end date, plus an affected geography. Losses outside the window are attritional even if the damage looks identical.
- Hours clauses apply: reinsurance treaties define how many hours of loss count as one occurrence, commonly 72 hours for windstorm and often longer for wildfire or freeze. This decides whether two days of storms are one event or two.
- Claims are coded on receipt: intake either applies the CAT code correctly at first notification, or the event cost is understated until someone re-codes the file weeks later.
Catastrophe claim example: one hailstorm, 4,000 files
A hailstorm crosses three counties on a Tuesday afternoon. By Friday an insurer has taken 4,000 first notifications from the affected postcodes, all coded to the same catastrophe number, with an average opening reserve of 9,000 dollars for a total incurred of 36 million.
With a 25 million dollar catastrophe retention and a 72 hour occurrence clause, whether the following Thursday's second hailstorm falls inside or outside that window changes the recovery by tens of millions. The coding decision is made by intake staff on a busy Friday, and it moves a reinsurance number.
Why CAT claims break normal claims operations
Everything that works at a normal claim volume fails at surge volume. Adjuster capacity is fixed, the loss adjusters who could travel are already committed, and the same demand surge that damaged the roofs also raises the price of fixing them.
- Capacity collapses first: field inspection capacity is the binding constraint, not handler headcount.
- Demand surge inflates severity: labour and materials cost more in the affected region for months, so an event's average claim is not comparable to a normal week's.
- Access is restricted: roads, evacuation orders and utility outages delay any assessment that needs a person on site.
- Fraud and inflated invoicing rise: opportunistic claims cluster around a declared event, which is a reason to look harder at outliers, never a verdict on any individual file.
- Reserving is unstable: early estimates on a live event move a lot, and the reserve on day three is not the reserve on day ninety.
Scale is not theoretical. Swiss Re Institute's sigma report put global insured natural catastrophe losses at 107 billion US dollars in 2025, with wildfires, severe convective storms and floods driving a record 92 percent of that total. The Palisades and Eaton fires in Los Angeles alone accounted for 40 billion dollars of insured loss, and severe convective storms for 51 billion.
What a catastrophe claim is commonly confused with
- A large loss: a single 8 million dollar factory fire is a large loss, not a catastrophe. Catastrophe means many claims from one event, not one expensive claim.
- A declared disaster: government disaster declarations follow their own political and geographic rules and do not match the insurance event definition.
- An excluded peril: flood or earthquake may be excluded from a policy regardless of whether the event is a catastrophe. Coding does not create cover.
- Aggregate weather losses: a bad winter of scattered freeze claims is severity, not a catastrophe, unless the events themselves qualify.
The practical lesson for a claims operation is that the response is decided long before the storm. Surge plans, pre-agreed adjuster capacity, event coding rules and a remote assessment route that does not depend on anyone reaching the property all have to exist in advance. The way surge exposes intake weaknesses is covered in FNOL automation and first notification of loss, and the effect on elapsed time in claims cycle time. Where an assessment is genuinely needed but the site cannot be reached, remote claim inspection is the route most insurers fall back on.
