What is a key characteristic of catastrophic risks?

A key characteristic of catastrophic risks is that they can result in severe destruction. These types of risks are associated with events that can cause significant damage, loss of life, and widespread disruption. Examples include natural disasters such as earthquakes, hurricanes, and floods, which have the potential to impact large areas and cause extensive harm to infrastructure, property, and communities.

The nature of catastrophic risks is such that they often exceed the capacity of individuals or organizations to manage or mitigate them effectively on their own, leading to consequences that reach far beyond localized impacts. This distinguishes them from other types of risks that may be more controllable or predictable. Understanding the severity and potential for widespread impact helps organizations and insurers to formulate strategies for disaster response and recovery.