Catastrophe Loss Reserve Calculator

Prudent portfolios hold reserves for major catastrophic events.

Total insured value

Probable max loss %

Named storm deductible %

Standard deductible

Uninsured exposure

Required CAT reserve

$3,746,250

Probable max loss

$10,000,000

Stacked deductibles

$2,525,000

How the math works

PML = insured × %. Stacked = named storm + standard. Reserve = (stacked + uninsured) × 1.35 buffer.

$50M × 20% = $10M PML. $50M × 5% + $25k = $2.525M stacked + $250k uninsured = $2.775M × 1.35 = $3.75M reserve.

How to Use

Enter total insured value.
Enter max probable loss %.
Enter named storm deductible %.
Enter standard deductible.
Enter uninsured exposure estimate.
Read required CAT reserve.

Frequently Asked Questions

What's a CAT reserve?

Cash or highly-liquid reserves held separate from operating accounts to cover catastrophic events: hurricane, tornado, earthquake, fire, flood, major water damage. Even with full insurance, deductibles + uninsured exposure can run $250k-5M+ per event depending on size. Institutional portfolios (50+ assets) hold 0.5-2% of total insured value in CAT reserves. Small portfolios often should hold more as a percentage since any single event could cause concentration damage.

How is it calculated?

Start with probable maximum loss (PML) — actuarial estimate of largest plausible single-event loss, typically 10-30% of total insured value depending on geography. Subtract expected insurance recovery (coverage limit minus deductibles). Add 25-50% safety buffer for cost overruns and timing risk. Many operators use CAT modeling firms (AIR, RMS, Verisk) for precise PML. Lenders may require CAT reserves separately from operating reserves.

Where do you hold it?

High-yield savings or money market at 4.5-5.5% (2023-2025 rates). Short-term Treasury bill ladder. NOT operating checking (liquidity different). NOT invested in market (volatility mismatch). Some institutional operators buy CAT bonds (a form of reinsurance) — transfer risk via capital markets. Family offices often underfund CAT reserves in favor of higher-returning investments, then scramble during an event. Discipline matters.

When to drawdown?

Immediately post-event for urgent repairs (prevent further damage, secure property). Before insurance settlement — settlements take 2-18 months. Plan to operate 12-24 months pre-settlement. Replenish reserve post-settlement. Some CAT events (like Hurricane Ian 2022) have seen 24+ month settlement times — longer than many reserves hold. Institutional operators maintain 'replenishment capital' available on credit facility for multi-event scenarios.