Hurricane Andrew: 30 years after a devastating storm | Business Insurance

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Insured losses from the storm in Florida alone were $15.5 billion and economic losses totaled more than $26 billion, according to Swiss Re.

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

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

For Mike Beach, McLarens Senior Vice President and Senior Executive General Adjuster, Andrew remains one of the biggest events of his career, along with 9/11, the 1989 and 1994 West Coast earthquakes and other major hurricanes that have hit him. they followed.

“I specifically remember just driving around in circles trying to locate properties, because there was extensive damage,” Beach recalled.

“They all looked alike at the time, a lot of rubble and no traffic signs.”

Adjusters did not have access to the technology they have today, including GPS and mobile phones with Internet access, and some trips could take three hours due to navigation challenges. Traffic lights were also out, Beach said, leading to traffic jams.

The significant devastation also meant that there were difficulties arranging hotels, renting cars and gasoline, while phone service was “spotty at best”, and food and restaurants were in short supply.

However, adjusters were able to fly to Fort Lauderdale within hours of Andrew’s death. Populous Miami, 20 miles north of the city of Homestead, where destruction was rampant, had also diverted the hurricane’s deadly wrath.

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Florida hadn’t experienced a major storm in about 20 years when Andrew hit. While Beach didn’t think there was “complacency,” she said the category five storm’s significance was “perhaps not expected.”

Many claims took years to resolve. Construction litigation followed, as lawmakers moved to improve building codes.

Read more: 25 years later: Lessons learned from Hurricane Andrew

For insurance agents, years of change would follow.

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

“He almost threw his policy overboard and said, ‘That’s all I have left.’”

All that was left of the man’s house, according to Webb, who went to see it for himself, was “a big stick with a teddy bear on it.”

In the immediate aftermath of the storm, people feared crime: Webb recalled a pastor who had started carrying a gun for safety. And in the months that followed, insurance fraud became commonplace, Webb said.

“I don’t blame anyone, but it was a fact that it was all happening so fast: The insurance companies didn’t know what they were doing,” Webb said.

The storm caused the insolvency of seven insurers and reshaped Florida’s insurance market. Major airlines such as Travelers, which faced a $400 million hit, were forced to rethink their exposure and regroup financially.

“I can’t say how many companies merged long after Andrew that I think had an Andrew effect,” Webb said.

Webb’s agency didn’t sell another policy for a year after Andrew, he told Insurance Business. Premiums skyrocketed, as did deductibles.

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

An unnamed trading partner had about $6 million in premium with the agency before Andrew, Webb said, about half on business lines and half on personal lines.

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

“Andrew came in August, and we were good for six months money-wise, then all of a sudden this company left state, their people left state, and I had to take out a half-million dollar SBA loan. to survive. ”, recalled Webb.

“We still had to pay the loan from the agencies that sent us and they no longer insured them; it was tough,” he added.

Meanwhile, the insurer’s boss got a one-time multimillion-dollar bonus that year, Webb said, something that left the insurance agency’s owner, also a shareholder in the company, “furious.”

The market dynamics for agents have changed in 30 years. These days, the fee is closer to 6% to 8%, up from 25% before Andrew made landfall, according to Webb. Agents increasingly have to look to Citizens, the state’s insurer of last resort since 2002, to house coastal policyholders.

Citizens, which was launched in 2002 when the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association, both created after Andrew to deal with an insurance access crisis, merged, surpassed one million policyholders this year. .

Triple-I and others have warned of a homeowners insurance “crisis” in Florida amid reduced capacity, despite no major storms since 2018’s Hurricane Michael.

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

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If Andrew were to hit today, insured losses would likely be in the region of $60 billion to $90 billion, according to Swiss Re research. This figure would double or triple should a similar storm make landfall in the area further densely populated Miami.

This is despite the fact that Florida is now “one of the best places” in terms of building codes designed to protect against hurricanes, according to Swiss Re’s head of cat hazards in the Americas, Erdem Karaca.

Sea level rise could also lead to greater losses: A six-inch rise driven by climate change, a possibility around 2030, could cause losses from flooding and storm surge to increase by 15% to 20%, according to the global reinsurer.

Protection gaps also remain, particularly in floods and due to urbanization, according to Swiss Re.

Meanwhile, another above-average hurricane season is forecast in the Atlantic basin.

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

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

Hurricanes Irma, Maria, Harvey, Laura, Ida and Michael are among the category four and five storms that have made landfall in the last five years. Harvey, which made landfall in Texas and Louisiana, resulted in economic losses of $148.8 billion alone, according to the National Oceanic and Atmospheric Administration, and is the second-costliest storm on record, second only to 2005’s Katrina.

“Hopefully the last five years are not a sign of what’s to come in the next five years, because that’s going to be hard to deal with, both for homeowners and taxpayers, and also for the insurance and reinsurance industry,” Karaka said.