On August 16, 1992, Tropical Storm Andrew formed in the Atlantic basin. By the time it made landfall in the Bahamas it was a major hurricane, and on August 24 it reached Elliot Key and then Fender Point, Florida as a category five storm.
Andrew was not done yet and it would go on to make landfall again in Louisiana, losing some of its ferocity on the way and hitting the Pelican State as a category three hurricane
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 are widely reported to have died indirectly or directly due to the storm.
In Dade County, around 250,000 people were rendered temporarily homeless, the NHC has said. Ninety-nine per cent (99%) of mobile homes in Homestead alone were destroyed, while in southern Dade County 63,000 homes were devastated and an additional 101,000 structures were damaged, according to the Insurance Information Institute (Triple-I).
For Mike Beach, McLarens SVP and senior executive general adjuster, Andrew remains one of the most significant events of his career, along with 9/11, the West Coast earthquakes of 1989 and 1994, and other major hurricanes that have 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 that point, a lot of rubble, and there were no street signs.”
Adjusters did not have access to the technology they have today, including GPS and internet enabled mobile phones, and some journeys could take three hours given the navigational challenges. Traffic lights were also out, Beach said, leading to jams.
The significant devastation also meant there were difficulties arranging hotels and rental cars and gas, while phone service was “spotty at best”, and food and restaurants were in short supply.
Adjusters were, though, able to fly into Fort Lauderdale within hours of Andrew passing. Populous Miami, 20 miles north of the town of Homestead where destruction was rampant, had also swerved the hurricane’s deadly wrath.
Florida had not experienced a major storm in around 20 years when Andrew hit. While Beach did not think there was “complacency”, he said the significance of the category five storm “perhaps wasn’t expected”.
Many claims took years to settle. Construction litigation followed, while legislators moved to improve building codes.
For insurance agents, years of change would follow.
“I’ll never forget one 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 down his policy and said: ‘That’s all I got left’”
All that remained 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 weapon for safety. And in the months that followed, insurance fraud became rife, Webb set out.
“I’m not blaming anybody, but it just was a fact it was so much going on so fast – insurance companies didn’t know what they were doing,” Webb said.
The storm drove the insolvency of seven carriers and re-shaped the Floridian insurance market. Major carriers, like Travelers which faced a reported $400 million hit, were forced to rethink their exposure and financially regroup.
“I can’t tell you how many companies merged way after Andrew that I think had an effect from Andrew,” said Webb.
Webb’s agency did not sell another policy for a year after Andrew, he told Insurance Business. Premiums went on to skyrocket, as did deductibles.
Relationships with insurers were strained in the months and years that followed.
One unnamed carrier partner had around $6 million premium with the agency before Andrew, Webb said, around half in commercial and half in personal lines.
“They called me and said, listen, we’re going to cancel your personal lines contract in order to get rid of homeowners,” Webb recounted.
“Andrew hit in August, and we were OK for six months moneywise, then all of a sudden, this company’s left the state, its people left the state, and I had to take an SBA loan for a half a million dollars to survive,” Webb recalled.
“We were still having to pay the loan on agencies that they sent us, and they were not insuring them anymore; it was tough,” he added.
The insurer boss, meanwhile, picked up a bumper multi-million-dollar bonus that year, Webb said – something that left the insurance agency owner, also a shareholder in the carrier, “livid”.
The market dynamics for agents have shifted in 30 years. These days, commission is closer to 6% to 8%, down from around 25% back before Andrew made landfall, according to Webb. Agents are increasingly having 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 set up in Andrew’s aftermath to deal with an access to insurance crisis – were merged, this year surpassed one million policyholders.
Triple-I and others have warned of a Floridian homeowners’ insurance “crisis” amid a capacity squeeze, despite no major storm hitting since 2018’s Hurricane Michael.
“Before Andrew, I don’t think I ever used a surplus lines company – I can’t remember using one,” Webb said. “Now, when it comes to property, 95% of it’s in surplus lines – I got a surplus lines licence after Andrew for that reason, just in case I needed it.”
Were Andrew to hit today, insured damage would likely be in the region of $60 billion to $90 billion, according to research by Swiss Re. This figure would double or triple in the event a similar storm made landfall in more densely populated Miami.
This is despite Florida now being “one of the best places” in terms of building codes designed to protect against hurricanes, according to Swiss Re head of cat perils Americas Erdem Karaca.
Rising sea levels could also force greater losses – a six-inch rise driven by climate change, a possibility around 2030, could see flood and storm surge losses rise by 15% to 20%, according to the global reinsurer.
Protection gaps also remain, particularly on flooding and due to urbanization, according to Swiss Re.
Meanwhile, yet another above average hurricane season has been forecast in the Atlantic Basin.
“Since 1995 or so the level of activity in the North Atlantic basin has been really much higher than the long-term averages,” Karaca said.
“We expect that trend to continue and not change, and that’s a reality that we have to live in.”
Hurricanes Irma, Maria, Harvey, Laura, Ida and Michael are among the category four and five storms to have made landfall within 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, surpassed only by 2005’s Katrina.
“Hopefully the last five years is not a sign of things to come in the next five years, because that will be difficult to manage – both for homeowners and taxpayers, and also for the insurance and reinsurance industry,” said Karaca.
