Hurricane Andrew – 30 years on from devastating storm

According to Swiss Re, insured losses from hurricanes in Florida alone were $15.5 billion and economic losses exceeded $26 billion.

Andrew’s direct death toll has been described by the National Hurricane Center (NHC) as “remarkably low given the destruction”. Sixty-five (65) people are widely reported to have died directly or indirectly from the storm.

The NHC has said that about 250,000 people in Dade County were temporarily rendered homeless. Ninety-nine percent (99%) of mobile homes were destroyed in Homestead alone, according to the Insurance Information Institute (Triple-I), while 63,000 homes were destroyed and an additional 101,000 structures damaged in southern Dade County.

For Mike Beach, McLarens SVP and senior executive general adjuster, Andrew is one of the most important events of his career, along with the 9/11, 1989 and 1994 West Coast earthquakes and other major hurricanes that have followed.

“I especially remember walking in circles trying to locate the properties, because there was extensive damage,” Beach recalled.

“They all looked the same at that point, with lots of debris, and no road signs.”

Adjusters did not have access to today’s technology, including GPS and Internet enabled mobile phones, and some trips could take up to three hours, given the navigational challenges. Beach said that the traffic lights were also off, leading to the jam.

Significant devastation also meant that there were difficulties arranging hotels and rental cars and gas, while phone service was “at best”, and food and restaurants were in short supply.

However, the adjusters were able to fly to Fort Lauderdale within hours of Andrew’s passing. Populous Miami, 20 miles north of the city of Homestead, where the destruction was widespread, also eased the storm’s deadly outbreak.

Florida had not experienced a major hurricane in nearly 20 years when Andrew hit. While Beach did not think there was “satisfaction”, he said that the magnitude of the Category five storm was “probably not expected”.

Many claims took years to settle. Construction litigation followed, while legislators moved to reform the building code.

Read more: 25 Years – Lessons Learned From Hurricane Andrew

For insurance agents, years of change will follow.

“I will never forget a house in Homestead,” said Thomas Webb, owner of Coastal Insurance Group, an insurance agency in Florida. “That guy came into my office and he looked all wet and sweaty.

“He almost dismissed his policy and said: ‘That’s all I have left'”

All that was left in the man’s house was “a big stick with a teddy bear on it,” according to Webb, who had visited it himself.

Immediately after the storm, people feared guilt – Webb recalled a pastor who had begun carrying a weapon to safety. And in the months that followed, insurance fraud became rampant, Webb set out.

“I’m not blaming anyone, but it was just the fact that it was going so fast – the insurance companies didn’t know what they were doing,” Webb said.

The storm lifted the bankruptcy of seven carriers and reshaped the Floridian insurance market. Major carriers, such as Travelers, which suffered a $400 million hit, were forced to rethink their exposure and regroup financially.

“I can’t tell you how many companies merged after Andrew, which I think was influenced by Andrew,” Webb said.

Webb’s agency did not sell another policy after Andrew for a year, he told Insurance Business. Premiums skyrocketed in the form of deductibles.

Relations with insurers remained strained in the months and years that followed.

An unnamed career partner before Andrew had a premium of about $6 million with the agency, Webb said, about half in commercial and half in personal lines.

“They called me and said, listen, we’re going to cancel your personal line contract to get rid of the homeowners,” Webb said.

“Andrew hit in August, and we were fine for six months of money, then all of a sudden, this company left the state, its people left the state, and I had to take out an SBA loan for half a million dollars to survive. ,” Webb recalled.

“We still had to pay off the loans at the agencies they sent us, and they were no longer insuring them; It was tough,” he said.

Meanwhile, the insurer boss picked up a bumper multi-million-dollar bonus that year, Webb said — something that left the insurance agency owner, who was also a shareholder in the carrier, “vivid.”

The market dynamics for agents have changed over 30 years. According to Webb, these days, commissions are closer to 6% to 8%, down from about 25% before Andrew’s landfall. With agents increasingly looking to citizens, state insurers have been taking the last resort to house coastal policyholders since 2002.

Citizen, which was launched in 2002 when the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association—both founded after Andrew to tackle the access to insurance crisis—merged. The year crossed one million policyholders.

Triple-I and others have warned of a Floridian homeowners insurance “crisis” amid a capacity squeeze, despite no major hurricanes since 2018’s Hurricane Michael.

read moreIs “the biggest private insurer failure in P&C history” coming?

“Before Andrew, I don’t think I’ve ever used a surplus line company — I don’t remember using one,” Webb said. “Now, when it comes to property, 95% of it is in surplus lines – I got a surplus line license after Andrew, just in case I needed it.”

According to research by Swiss Re, if Andrew were to hit today, the insured damage would have been in the region of $60 billion to $90 billion. In the more densely populated Miami, that figure would double or triple in the event of a similar storm.

According to Swiss Ray Head of Cat Perils America Erdem Karaka, Florida is now despite being “one of the best places” in terms of building codes designed to protect against hurricanes.

According to the global reinsurer, rising sea levels could force even more damage – a six-inch rise induced by climate change, a possibility around 2030, could increase flood and storm damages by 15% to 20%.

According to Swiss Re, conservation gaps also remain, especially due to flooding and urbanization.

Meanwhile, a higher-than-average hurricane season has so far been forecast in the Atlantic basin.

“The level of activity in the 1995 or so North Atlantic basin has actually been much higher than the long-term average,” Karaka said.

“We expect the trend to continue and not change, and that’s a reality we have to live with.”

Hurricanes Irma, Maria, Harvey, Laura, Ida and Michael are among category four and five hurricanes that have made landfall within the past five years. According to the National Oceanic and Atmospheric Administration, Harvey, which made landfall in Texas and Louisiana, alone caused $148.8 billion in economic damage, and is the second costliest hurricane on record, surpassing only 2005’s Katrina.

“Hopefully the last five years are not a sign of things to come in the next five years, as it will be difficult to manage – both for homeowners and taxpayers, and also for the insurance and reinsurance industry,” Karaka said.

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https://www.insurancebusinessmag.com/us/news/catastrophe/hurricane-andrew–30-years-on-from-devastating-storm-418026.aspx

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