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🌀 '''Hurricane Andrew''' is the Category 5 [[Definition:Catastrophe | catastrophe]] that struck South Florida on August 24, 1992, and stands as a defining inflection point for the modern insurance industry — a single event that exposed critical weaknesses in [[Definition:Catastrophe model | catastrophe modeling]], [[Definition:Reserving | reserve adequacy]], [[Definition:Reinsurance | reinsurance]] structures, and [[Definition:Building code | building code]] enforcement, and that reshaped how [[Definition:Insurance carrier | carriers]] think about concentrated [[Definition:Exposure | exposure]] to natural disasters. The storm caused an estimated $27 billion in insured losses at the time (over $55 billion in inflation-adjusted terms), destroyed or damaged more than 125,000 homes, and directly led to the [[Definition:Insolvency | insolvency]] of at least eleven insurance companies.

📉 Before Andrew, many insurers relied on rudimentary historical-average methods to estimate their probable maximum loss from hurricanes, and the results proved dangerously inadequate when a major storm hit a densely populated, high-value coastal area. The catastrophe laid bare the fact that carriers had accumulated enormous concentrations of [[Definition:Homeowners insurance | homeowners]] and [[Definition:Commercial property insurance | commercial property]] risk in South Florida without adequate [[Definition:Reinsurance | reinsurance protection]] or [[Definition:Surplus | capital reserves]]. In the aftermath, the industry rapidly adopted third-party [[Definition:Catastrophe model | catastrophe models]] from firms like AIR Worldwide, RMS, and EQECAT, which used engineering, meteorological, and actuarial science to simulate thousands of potential hurricane scenarios and quantify [[Definition:Probable maximum loss (PML) | probable maximum losses]] with far greater rigor. Regulators, too, responded: Florida created the [[Definition:Florida Hurricane Catastrophe Fund (FHCF) | Florida Hurricane Catastrophe Fund]] and the state-backed [[Definition:Citizens Property Insurance Corporation | Citizens Property Insurance Corporation]] to provide backstop [[Definition:Capacity | capacity]] in a market that private carriers were abandoning.

🏛️ Andrew's legacy reverberates through virtually every aspect of how the industry manages [[Definition:Catastrophe risk | catastrophe risk]] today. The event catalyzed the growth of the [[Definition:Insurance-linked securities (ILS) | insurance-linked securities]] market, as carriers and reinsurers sought [[Definition:Alternative capital | alternative capital]] sources to supplement traditional reinsurance. It drove stricter [[Definition:Building code | building codes]] in Florida and influenced similar reforms in other hurricane-prone states. And it established a lasting industry axiom: the models are only as good as the data and assumptions behind them, a lesson reinforced by every major windstorm season since. For students of insurance history, Andrew is the case study that transformed catastrophe management from a back-office afterthought into a board-level strategic discipline.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe model]]
* [[Definition:Catastrophe risk]]
* [[Definition:Insurance-linked securities (ILS)]]
* [[Definition:Florida Hurricane Catastrophe Fund (FHCF)]]
* [[Definition:Probable maximum loss (PML)]]
* [[Definition:Homeowners insurance]]
{{Div col end}}

Definition:Hurricane Andrew - Revision history

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