Hurricanes Rita and Wilma (2005)

On August 29, 2005, Katrina floods New Orleans. Less than a month later, on September 24, Rita hits the Texas-Louisiana border as a Category 3 after having been at one point a Category 5 in the Gulf of Mexico, and on October 24 Wilma strikes Florida, after having broken the Atlantic's lowest pressure record. The trio costs insurance tens of billions of dollars and makes 2005 the costliest natural catastrophe season of its time. For reinsurance, it is a turnaround. Cat layer prices rose sharply, more than doubling in places, in affected zones at the 2006 renewals, models were revised (RMS and AIR raised their rates and their allowance for post-event demand surge), and rating agencies changed their capital requirements for cat risk. Above all, new capital arrived within weeks: a series of Bermuda reinsurers, including Validus, Flagstone and Lancashire, were launched in autumn 2005 with several billion dollars raised on the market. Sidecars flourished, and the cat bond market doubled in two years. The season thus set the shape of cat reinsurance until 2017: prices that rise after a big loss, capital that arrives faster than expected, and modeling that readjusts.