What if a major insurer collapses under catastrophe losses?
A catastrophe-driven insurer failure transmits through credit, not equity beta: HY spreads widen, financials lead lower and VIX lifts as counterparty fear spreads. The COVID circuit-breaker analogues overstate it; the truer rhyme is AIG 2008, where an insurer's collateral/CDS hole was the systemic node. Forward angle: today's reinsurance and ILS/cat-bond layering disperses risk more widely than 2008, so the shock is more likely a spread-widening scare than a Lehman-grade seize-up.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A major insurer fails under climate/catastrophe losses, stressing the system. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.