The recent catastrophes such as Hurricane Katrina, Tsunami etc., indicate the rising number and severity of catastrophes. Traditional and alternative risk transfer mechanism have, to some extent, addressed the catastrophe risk management issues. However, there has been a demand for more effective and fool-proof tools. This article makes an attempt to study the existing tools available for managing catastrophes.

On October 8, 2005, a severe earthquake measuring 7.4 on the Richter scale annihilated Pakistan, Pakistan Occupied Kashmir, North India, and some parts of Afghanistan. Preliminary estimates suggest that more than 90,000 people were killed, and property worth millions of dollars was destroyed.

In the last week of August 2005, Hurricane Katrina, the strongest storm to have ever occurred in the last one century affecting the coast of the United States (US), claimed more than 8000 lives.2 The amount of losses was estimated to be around $400 bn, resulting in the largest economic disaster in US.

Tsunami, which occurred on December 26, 2004 is termed as one of the most devastating natural disaster of the recent times in the south Asian region. It rocked the west coast of Sumatra in the Indian Ocean, killing more than 250,000 humans, and destroying property worth $550 mn.In simple terms catastrophe loss, can be defined as `a loss of unusual size; a shock loss: A very large loss', while catastrophic risk is `the risk that a single event of major magnitude leads to a significantly higher than usual number and/or amount of claims on an insurer'.

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