A Hurricane Andrew repeat would cost $56bn in the US: AIR
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 US, catastrophe risk modelling firm AIR Worldwide said on Aug. 21.
Nearly 95 percent of the losses would be 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.
“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 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 US history at the time, 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.”
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.
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