How do insurance companies survive through major disasters?

Question

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

Answer 1

Reinsurance. Risk gets spread well beyond the initial policy issuer. Big losses are spread, and not really held by people selling the initial insurance