What is a Catastrophe? - Insurance Navy. In insurance, a catastrophe, often called CAT, is an unexpected event that causes physical damage to businesses, properties, or life. Catastrophic events can include Natural disasters such as hurricanes, earthquakes, severe floods, and wildfires; or traumatic events such as man-made events like terrorist attacks and large-scale accidents. The Insurance Services Office (ISO) defines a catastrophe as an event that causes $25 million or more in insured losses and affects many policyholders and insurers. As a result of a catastrophic event, insurance companies face a rise in claims; which can strain their resources and endanger their financial stability. To prevent this from happening and protect themselves, insurers often purchase catastrophe insurance, which reimburses catastrophe losses over a certain amount of time. Extreme events, like environmental catastrophes, can also impact premiums and underwriting practices.