Hurricane Andrew: The 20 miles that saved Miami

Twenty-five years have passed since Hurricane Andrew roared ashore in Florida as a Category 5 hurricane, devastating parts of the state to become one of the defining events in the history of the US insurance industry.

In 1992, Andrew destroyed more than 25,000 homes, damaged more than 100,000 others and caused USD 26.5 billion worth of damage, of which just USD 15.5 billion was covered by insurance.

Andrew's landfall and eventual impact on the insurance industry spurred an overhaul of catastrophe modeling, and was the storm that helped shape today's modern catastrophe models.  Despite these improvements, as well as the development of innovative insurance solutions to provide coverage that is more comprehensive to insurance buyers, the protection gap persists and has unfortunately widened over time. 

A new report from Swiss Re, Hurricane Andrew: The 20 miles that saved Miami, uses our proprietary tropical cyclone model to examine two key questions: What would the impact of Andrew be today and what would happen if the storm made landfall 20 miles north, directly over Miami?

How significant could the loss be?

Miami-Dade County has seen a population boom of more than 35% and huge growth in property values and asset concentration since 1992.

The same storm today could cause an estimated economic loss between USD 80-100 billion, of which only USD 50-60 billion would be covered by insurance, thus leaving a significant shortfall to be made up by taxpayers and governments.

Yet those losses pale in comparison to those associated with a present-day Andrew making landfall 20 miles north of its historical landfall location, putting Andrew's eye directly over Miami. Losses in this case are estimated to be USD 100-300 billion, making it the costliest natural disaster ever seen in the US. Only USD 60-180 billion would be covered by the private insurance market, leaving a huge shortfall in funding to rebuild.

"Hurricane Andrew led to tremendous losses in Florida, and it's a real concern to think about what would happen if a storm like Andrew were to hit the region today," said Marla Schwartz, Atmospheric Perils Specialist and co-author of the paper. "The question isn’t if a storm like Andrew will strike Florida again, but when."  

Mitigating the risk

While work has been done since 1992 to mitigate future damage from hurricanes, the numbers above clearly demonstrate there is more that needs to happen.

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