25 Years Later—What If Hurricane Andrew Were to Strike Again?

Category 5 Hurricane Andrew tore into South Florida on August 24, 1992, 17 years after the previous landfall of a major hurricane in that state. Andrew killed dozens and caused an estimated USD 15.5 billion (1992 dollars) in total insured losses—USD 15.0 billion in Florida—and resulted in the insolvency of 11 insurance companies. The most costly natural disaster in U.S. history at the time, Andrew changed forever how (re)insurers approach hurricane risk management, spurring the growth of the emerging catastrophe modeling industry and ultimately prompting the development of insurance-linked securities as an asset class.

Hurricane Andrew,
Then and Now


What If Hurricane Andrew Strikes Miami?

Hurricane Andrew and the promise of catastrophe modeling

The catastrophe modeling framework AIR established five years before Hurricane Andrew made landfall continues to be the industry standard for helping companies assess and manage extreme event risk. Today—enabled by exponentially larger data sets and computational power—companies can assess the frequency and severity of an ever broader range of perils across the globe. Yet back in Florida, what do we make of the ongoing “drought” of major U.S. hurricane landfalls? At some point the drought will end, that we do know, and a dangerous, destructive Hurricane Andrew forever remains a possibility.

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For more information:

AIR Hurricane Model for the United States

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AIR Solutions for ILS Investors

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So You Want to Issue a Cat Bond

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1 USD 15.5 billion total insured loss from PCS, USD 15.0 billion in Florida and USD 500 million in Louisiana.
2 Modeled losses for Hurricane Andrew today and for an Andrew-like hurricane making landfall near Miami (shown elsewhere on this webpage) are based on today’s building inventory. The losses assume that large commercial properties are 100% insured against storm surge damage but that only 5% of storm surge losses to homes and small business are covered. The loss estimates include the expected increases in the costs of labor and materials necessary to repair or rebuild properties in the aftermath of a large storm (see “What Demand Surge Might Look Like in This Year's Hurricane Season”).
3 See note 2.



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