Some natural disasters devastate huge amounts of property and assets costing huge amounts of money that I would assume policy holders would want to claim. Maybe I am naive to the huge amounts of profit that insurance companies make, but how do they survive financially?
In: Economics
They spread risk (types of policies, geographic), analysis of pst data to determine future risk and payout cost used to set premiums, hoard & invest cash (cash reserves are separate from operating income/profits), take out reinsurance policies (so Stars Farm, Allstate, etc. have coverage that pays out losses beyond an amount, say $5B in homeowners claims in a year)
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