Normal movements vs catastrophic movements in the stock market

TOMIC is willing to take the risk of normal moves in the market, such as plus or minus 5% price movement, but it reinsures the catastrophic risk beyond.
To reinsure this risk, TOMIC could buy out-of-the-money puts on the S&P 500 to protect against a large (25%) downturn in the market.

Another alternative to reinsure could be to buy out-of-the-money calls on the VIX. This assumes that a large drop in the S&P 500 would lead to a large spike in the VIX.

Depending on the pricing of the SPX puts and the VIX calls, TOMIC could use one or both options to offload the catastrophic risk.