What Might Major Historical U.S. Hurricanes Cost Now?

October 01, 2015

In the recent AIR Currents article, Katrina 2015, AIR asks what levels of damage could be expected if a storm with the intensity, size, and track of 2005's Hurricane Katrina were to recur today.

Historical storms, if repeated, may have very different consequences from when they originally occurred. A whole raft of factors changes the game, the most important of which is increased development and rising replacement values in at-risk areas. At the same time, the evolution of building codes, improved flood defenses, and the implementation of other mitigation measures work to reduce risk.

AIR has estimated insured losses for a number of significant historical hurricanes in the United States based on exposures as of the end of 2013, to see what their impact would be today. The table below gives the results for the ten storms with the highest losses, rounded to nearest billion U.S. dollars. Hurricane Sandy ranked 16th on the list and does not appear in this table.

These figures include modeled loss to property, contents, and business interruption as well as additional living expenses for residential, mobile home, commercial, and auto exposures. The losses also include demand surge-the upward pressure on labor and materials costs after a major event.

Estimated Insured Losses for Historical Hurricanes in the United States Based on Exposures as of the End of 2013 (Source: AIR Worldwide)
Event name 2015 Insured Loss
1926 Great Miami, Category 4 Hurricane $119 billion
1928 Okeechobee, Category 4 Hurricane $72 billion
1947 Fort Lauderdale, Category 3 Hurricane $60 billion
2005 Katrina, Category 3 Hurricane $58 billion
1965 Betsy, Category 4 Hurricane   $53 billion
1992 Andrew, Category 5 Hurricane $52 billion
1960 Donna, Category 4 Hurricane $46 billion
1938 Great New England, Category 3 Hurricane $44 billion
1900 Galveston, Category 4 Hurricane $44 billion
1950 Easy, Category 2 Hurricane $28 billion

With Hurricanes Sandy and Katrina still very fresh in our minds,it may come as a surprise to see how many other storms would surpass them in loss totals if replicated today.

The Great Miami Hurricane of 1926, which is thought to have packed Category 4 wind speeds, caused total (insurable) damage estimated at USD 105 million in 1926 dollars according to the National Weather Service. It devastated Miami and caused extensive damage in the Florida Panhandle, Alabama, and the Bahamas. With insured losses estimated at USD 119 billion in today's dollars and today's exposures, it still far outpaces all other U.S.hurricanes.

Dade County, home to Miami, had a population of roughly 100,000 people in 1926. Its population is now estimated at 2.6 million. The much higher loss total in today's dollars and today's exposures is due largely to the much greater development of the area, the increased wealth of its population (resulting in higher replacement values of both buildings and contents), and higher sea levels, but it also takes into account improved building codes and other mitigating factors.

The other events ahead of Katrina in this list, the Okeechobee hurricane of 1928 and the Fort Lauderdale hurricane of 1947, both caused extensive flooding as a result of storm surge. The Okeechobee hurricane inflicted catastrophic damage on coastal south Florida where damage to property was estimated at USD 25 million in 1928 dollars according to the National Hurricane Center. The Fort Lauderdale hurricane impacted parts of Florida before making a second landfall southeast of New Orleans. Foreshadowing Katrina in some regards, it caused widespread flooding within and far beyond the city and led directly to the creation of an enlarged levee system to safeguard the area.

This exercise helps to put hurricane risk in perspective by reminding us that although Hurricanes Sandy and Katrina were indeed significant events, even costlier hurricanes are entirely possible in the future. Although we are experiencing a ten year "drought" of major hurricanes, we should not be lulled into believing that one won't happen again, because it will.

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