Hurricane Andrew (1992)
A Category 5 hurricane that hit South Florida in 1992, bankrupted several insurers and gave rise to catastrophe modeling and the Bermuda market.
Before Andrew, insurers estimated their hurricane exposure from past claims, and no major hurricane had hit such a built-up area in decades. The actual cost far exceeded those estimates, whereas a probabilistic model that simulated thousands of storms against current exposures had put out a correct order of magnitude within hours of landfall. The event made catastrophe modeling a standard tool for underwriting and capital, and prompted the creation of new reinsurers, capitalized in Bermuda to sell the capacity that was missing. It also brought the State of Florida into the market, through a public reinsurance fund and insurers of last resort. Nearly the whole current architecture of catastrophe risk, from models to cat bonds, traces back to this storm.
On August 24, 1992, Andrew made landfall at Homestead, south of Miami, as a Category 5; insured losses reached about 15.5 billion dollars at the time, eleven insurers became insolvent, and Florida created its public hurricane reinsurance fund in 1993.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.