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🌪️ '''Catastrophic risk plan (CAT)''' is a formalized strategy or program through which an [[Definition:Insurance carrier | insurer]] or [[Definition:Reinsurance | reinsurer]] identifies, quantifies, and manages its exposure to [[Definition:Catastrophe | catastrophic events]] — natural or man-made — that could produce correlated, large-scale losses across a portfolio. In some markets, the term also refers to specific pooling mechanisms or state-sponsored plans designed to ensure coverage availability for catastrophe-prone risks that private markets alone may not absorb, such as windstorm pools in the United States or earthquake pools in jurisdictions like Japan, Turkey, and New Zealand.

⚙️ A comprehensive CAT plan typically integrates several components: [[Definition:Catastrophe modeling | catastrophe modeling]] to estimate probable maximum losses and [[Definition:Return period | return-period]] scenarios; a defined [[Definition:Risk appetite | risk appetite]] framework that sets aggregate exposure limits by peril and geography; a [[Definition:Reinsurance program | reinsurance program]] combining [[Definition:Excess of loss reinsurance | excess-of-loss]] and [[Definition:Aggregate excess of loss reinsurance | aggregate covers]] to transfer peak exposures; and [[Definition:Capital management | capital planning]] to ensure solvency under stress. Regulatory regimes reinforce this discipline — [[Definition:Solvency II | Solvency II]] requires insurers to hold capital against a 1-in-200-year catastrophe scenario, while the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC's]] [[Definition:Risk-based capital (RBC) | risk-based capital]] framework in the United States and [[Definition:C-ROSS | C-ROSS]] in China each prescribe their own catastrophe stress calibrations. Increasingly, [[Definition:Insurance-linked securities (ILS) | insurance-linked securities]] such as [[Definition:Catastrophe bond | catastrophe bonds]] supplement traditional reinsurance within these plans, broadening access to capital markets capacity.

📊 Without a robust catastrophic risk plan, an insurer's solvency can be jeopardized by a single season of severe events — a reality underscored by the growing frequency and severity of [[Definition:Natural catastrophe | natural catastrophes]] driven by climate change and increasing insured values in exposed regions. Regulators, [[Definition:Credit rating agency | rating agencies]], and investors all scrutinize the quality and coherence of an insurer's CAT plan as a barometer of enterprise risk governance. For the broader market, well-structured catastrophe plans promote stability by preventing disorderly insolvencies and ensuring that coverage remains available to policyholders in high-risk areas, supporting economic resilience in the face of extreme events.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe modeling]]
* [[Definition:Catastrophe bond]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Insurance-linked securities (ILS)]]
* [[Definition:Reinsurance program]]
* [[Definition:Aggregate exposure management]]
{{Div col end}}

Definition:Catastrophic risk plan (CAT) - Revision history

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