The Impact of Hurricane Andrew on Insurance Models

Hurricane Andrew in 1992 served as a pivotal moment for the insurance industry, challenging existing risk assessment models. Karen Clark developed catastrophe models predicting that a strong hurricane could lead to $60 billion in losses, significantly higher than industry expectations. As Andrew tore through Florida, the actual losses exceeded $15 billion, highlighting the inadequacy of prior loss estimates. This event forced insurers to rethink their approaches to risk, especially regarding climate events, marking the beginning of a newfound respect for climate-related catastrophes.