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
If a potential risk is big enough then the individual insurers will just take a small percentage. Then they can reinsure that if they feel too ‘exposed’.
Then if that risk is too big for the Reinsurers then they can reinsure it too (for instance I’ve seen an old policy for earthquake insurance for Tokyo and the layers are insane.)
Insurers tend to limit their exposure to any one type of risk anyway so they don’t get hit multiple times for a single event.
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