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

They insure themselves against a major catastrophe. It’s called reinsurance. Who insures the reinsurers? Well, in the end, it all turns into an securitized asset (like stocks and bonds). So investors see their portfolio value fall.