Hurricane Andrew would today cost $56bn, says AIR Worldwide
A hurricane the same strength and path as Hurricane Andrew would cost insurers $56bn today against the $15.5bn of losses in 1992 when it struck south Florida, according to catastrophe modelling firm AIR Worldwide. Almost 95% of the losses would be from property claims in Florida.
Total insured loss could exceed $138bn if a similar storm stuck just eight miles north of Andrew’s 1992 landfall and hit the city of Homestead, according to AIR.
The firm said that an Andrew-like hurricane hitting Miami, modelled between Palmetto Bay and Pinecrest, would activate insurance-linked securities and trigger an estimated 25 catastrophe bonds. AIR Worldwide said an estimated 47 tranches would incur losses and 38 would be exhausted, with a total $6.3bn loss to the catastrophe bond market.
Hurricane Andrew was the costliest natural disaster in US history at the time and spiralled 11 insurance companies into insolvency.
“Andrew changed forever how (re)insurers approach hurricane risk management, spurring the growth of the emerging catastrophe modelling industry and ultimately prompting the development of insurance-linked securities,” said Dr Peter Sousounis, assistant vice president and director of meteorology at AIR Worldwide.
Hurricane Andrew first struck the Bahamas on 23 August, 1992 as a category 5 hurricane before making landfall at Florida’s Elliot Key and Homestead Air Force Base, just missing the city of Homestead. Hurricane Andrew went on to cause major destruction to Dade County with $15bn of insured losses in Florida and an additional $500m in Louisiana. The hurricane later entered the Gulf of Mexico and damaged almost 90 offshore platforms before making a third landfall in Louisiana as a category 3 storm.
