Marla Schwartz, Atmospheric Perils Specialist, Swiss Re
On August 14, 1992, a small and seemingly insignificant tropical wave developed off the west coast of Africa. Three days later, the depression reached tropical storm status, earning the innocent name Andrew. After intensifying over warm Gulf Stream waters, not-so-innocent Andrew slammed into Miami-Dade County at 5:05am on August 24.
The first Atlantic tropical storm of the 1992 hurricane season arrived in South Florida at an ill-fated time. Decades had passed since South Florida’s last major hurricane landfall, and memories of Betsy’s 1965 destruction had faded. Some Floridians grew complacent when it came to hurricane preparation and traditional stick frame houses were widespread.
Plowing into the coast with one-minute sustained winds over 165mph, Hurricane Andrew’s 1992 rampage caused USD 26.5bn in economic damage (1992 USD), destroying more than 25,000 homes and damaging an additional 100,000. The storm left nearly 250,000 people temporarily homeless and 65 dead. One of only three hurricanes to be at Category 5 intensity upon its landfall in the US, Hurricane Andrew upended homes, businesses and lives in the Miami suburbs.
In response to Andrew, Florida improved hurricane preparedness, emergency management and disaster recovery. The state beefed up building codes and began regular house inspections. Andrew left a mark on the (re)insurance industry by changing our perception of risk and stimulating trust in catastrophe models.
Last month, we marked the 25 years since Andrew’s landfall in South Florida. This benchmark served as an opportunity to remember the devastation and lives lost, as well as to appreciate the rebuilding efforts and resilient spirit that have allowed South Florida to flourish again.
With all the talk about Andrew’s impact on South Florida and (re)insurance, it is only natural to wonder: What if Andrew hit South Florida in 2017? Is South Florida a sitting duck for the next Big One? Fortunately, the insurance industry has tools to answer these questions and a recent Swiss Re publication took a deep dive into this topic.
Andrew caused 26.5bn (1992 USD) in economic damage, but losses from a present-day storm with an identical track and at the same intensity would dwarf the losses experienced in 1992. Our analysis shows that physical damage from a present-day Andrew would exceed USD 80bn-100bn, and only USD 50bn-60bn would likely be insured.
Damages increase due to a combination of population growth and coastal development. Yet, the physical damage is under USD 100bn because of efforts to address South Florida’s vulnerability. (Miami-Dade, together with neighboring Monroe and Broward Counties, maintains the nation’s highest wind standards when it comes to building codes.)
As hurricane geeks and reinsurance professionals, an even scarier hypothetical comes to mind: What if Andrew made landfall about 20 miles north of its historical landfall location in Fender Point, FL? This would place Andrew’s eye directly over Miami, an area far more populated, developed and commercialized compared to Homestead, yet arguably no less vulnerable or prone to hurricanes.
Catastrophe models allow us to estimate the financial impact of hurricanes that have not necessarily occurred in the historical record, but are physically possible. A hurricane of comparable intensity and size to Andrew that makes landfall in the city of Miami is estimated to produce losses to the insurance industry of a magnitude not yet observed: USD 60bn-180bn. The estimated economic damage from such an event ranges from USD 100bn-300bn, making it the costliest natural disaster ever in the US.
While these numbers invoke a sense of “sticker shock,” the difference between economic and insured losses calls attention to a profound protection gap and the remarkable weight carried by society when natural catastrophes like Andrew occur. We must close the protection gap together to reduce the impact of these inevitable shocks.
Numbers like these serve as a wake-up call: It is more important than ever to better understand hurricane risk, to learn about new solutions that address the protection gap, and to consider if insurance instruments are sufficient to cover financial needs in the event of a significant loss, like an Andrew.
You can download a copy of the full publication at http://www.swissre.com/library/archive/hurricane_andrew_the_20_miles_that_saved_miami.html. The report dives into the topics above, and offers insight on changes in South Florida since Andrew, the impact of global sea level rise on storm surge, and Miami’s recent efforts to mitigate their ever-increasing flood and hurricane risk.
The 25th anniversary of Andrew’s landfall served as a wake-up call to the insurance industry, homeowners, small businesses, public officials and the private sector to better manage hurricane risk and remember it’s not a matter of if a major hurricane will barrel through South Florida, but when.
In an almost surreal turn of events, Florida Governor Rick Scott warned last week that Irma is “bigger, faster and stronger” than Hurricane Andrew. Harvey’s catastrophic flooding in Texas and Irma’s destruction throughout the Caribbean and US only serve to reiterate the importance of understanding and addressing hurricane risk. Over the last few weeks, as my eyes have been glued to news reports, hurricane forecasts and photos of devastation, I have been reminded of the importance of resiliency and how critical it is to plan better.
Marla Schwartz is an atmospheric perils specialist at Swiss Re, where she develops tools and techniques to assess risk due to wind-related perils, including hurricanes, tornadoes, hail, wildfire and winter storms. Prior to joining Swiss Re, Marla was a postdoctoral researcher at UCLA where she investigated impacts of climate change to snowpack accumulation and snowmelt in the Sierra Nevada Mountains. She obtained a PhD and MS in Atmospheric and Oceanic Sciences from UCLA, and a BA in mathematics from Columbia University.