Ever wonder how an insurance company pays out claims in areas affected by a catastrophe? Insurance companies hire actuaries which are professionals that study statistics in order to measure and manage risk, uncertainty, and previous losses to help insurance companies know the financial consequences. They also take and study interest rates, temperature rates, and any other rates that helps them come up with a justifiable premium. Premiums vary from where you live to the type of home you have. For example, people living in Monroe Florida will have a higher premium than people living in Chicago because Monroe Florida is next to the ocean; therefore, they are at a higher risk of having hurricanes and tsunamis (even though it is a small, but still a likey risk) which causes serious damages.
Once the insurance company collects your premium, it goes into something called a Risk Pool. Risk Pools is where everyone's premium that's live within a predetermined geological location goes into, then paid out from when a claim within that area needs to be settled. After a catastrophic loss, the money from the risk pool will be distributed to everyone who has suffered a loss based on the damages filed and settled. Once everyone has been indemnified for their losses, the premiums for everyone within the risk pool affected by a catastrophic storm will increase in order for the insurance company to replenish the risk pool regardless if the policyholder has filed a claim or not.