Twenty-Five Years after Hurricane Andrew: AIR Analyzes the Impact if it Were to Strike Again Today
BOSTON, Aug. 21, 2017 — Catastrophe risk modeling firm AIR Worldwide estimates that if Hurricane Andrew were to recur today the expected total industry insured losses (based on today's exposures) would be approximately $56 billion in the United States, with nearly 95% of the losses coming from properties in Florida. If a similar Category 5 Andrew-like hurricane were to strike just south of Miami and just 8 miles north of Andrew’s landfall in the city of Homestead, AIR estimates that total insured losses would exceed $138 billion, with losses in Florida exceeding $127 billion. AIR Worldwide is a Verisk Analytics (Nasdaq:VRSK) business.
“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,” said Dr. Peter Sousounis, assistant vice president and director of meteorology at AIR Worldwide. “Andrew killed dozens and caused an estimated $15.5 billion in total insured losses, according to Property Claims Services® (PCS), and resulted in the insolvency of 11 insurance companies. The costliest 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.”
If a major hurricane were to strike Miami, making landfall between Palmetto Bay and Pinecrest, it would prompt immediate activity in the marketplace for insurance-linked securities (ILS). For this Andrew-like Category 5 hurricane striking Miami, AIR estimates that 25 catastrophe bonds would be triggered, 47 tranches would take losses, 38 tranches would be completely exhausted, and there would be a $6.3 billion loss to the catastrophe bond market principal.
Background information on Hurricane Andrew
Hurricane Andrew formed August 14, 1992. On August 23, Andrew struck the Bahamas as a Category 5 storm, weakened to Category 4 over land, then regained Category 5 strength in the warm Florida Straits. At 4:40 a.m. on August 24, Andrew slammed into Florida’s Elliot Key and just minutes later made a second landfall, at Homestead Air Force Base, just east of the city of Homestead. The most destructive hurricane to hit Florida since Hurricane Betsy in 1965 and only the third Category 5 hurricane to make U.S. landfall since 1900, Andrew devastated Dade County and caused $15.0 billion (1992 dollars) in insured damage in Florida and an additional $500 million in Louisiana.
A few hours after Florida landfall, Hurricane Andrew entered the Gulf of Mexico, reintensified, and damaged or destroyed nearly 90 offshore platforms en route to a third landfall on August 26, as a Category 3 storm, in south-central Louisiana.
About AIR Worldwide
AIR Worldwide (AIR) provides risk modeling solutions that make individuals, businesses, and society more resilient to extreme events. In 1987, AIR Worldwide founded the catastrophe modeling industry and today models the risk from natural catastrophes, terrorism, pandemics, casualty catastrophes, and cyber attacks, globally. Insurance, reinsurance, financial, corporate, and government clients rely on AIR’s advanced science, software, and consulting services for catastrophe risk management, insurance-linked securities, site-specific engineering analyses, and agricultural risk management. AIR Worldwide, a Verisk Analytics (Nasdaq:VRSK) business, is headquartered in Boston with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.