Skip to main content

Glenn McGillivray is the managing director at the Institute for Catastrophic Loss Reduction in Toronto.

As the ominous Hurricane Irma closes in on Florida, Hurricane Jose reaches Category 4 status, Hurricane Katia and an 8.1 magnitude earthquake menace Mexico, and California and British Columbia continue to burn, there has been no shortage of tongue-in-cheek queries about the expected arrival of locusts and the four horsemen.

This rather uncommon clustering of events is reminiscent of the bad old days, the late 1980s and early 1990s, when a string of very large, costly and disruptive catastrophes occurred around the world, although most pronouncedly in the U.S.

Story continues below advertisement

These losses, both natural and man-made, include 1989's Piper Alpha and Exxon Valdez industrial disasters, Hurricane Hugo and San Francisco earthquake; 1990's quartet of European winter storms; 1991's Typhoon Mireille and Hurricane Bob; and 1992's Hurricane Iniki and Hurricane Andrew.

Read more: Hurricane Irma: Everything you need to know as the catastrophic storm barrels towards Florida

Elizabeth Renzetti: The cost of a hurricane is high, especially if you can't afford to flee

Read more: Canadian insurers brace for a future saturated with flood damage claims

Between 1989 and 1992, the five largest insured losses alone totalled almost $30-billion (U.S.) (more than $50-billion today). This doesn't include large losses driven by the January, 1994, Northridge, Calif., and January, 1995, Kobe, Japan, earthquakes, which together caused insured damage of some $30-billion (2016 dollars).

For sake of comparison, worldwide disaster losses from 191 events totalled $42-billion in 2016.

Hurricane Andrew alone, which struck South Florida on Aug. 24, 1992 – 25 years ago last month – triggered a whopping $15.5-billion in insured losses ($27.4-billion 2016 dollars), almost four-times more than the previous record U.S. hurricane loss (1989's Hugo, at $4.2-billion 1989 dollars).

Story continues below advertisement

Andrew proved to be a game-changer as far as North Atlantic basin hurricanes go. The Category 5 storm tore through the Bahamas before making landfall at Homestead and Elliott Key, Fla., with winds as high as 270 km/h. The storm claimed 65 lives, destroyed more than 63,500 homes, damaged more than 124,000 others and triggered more than 680,200 insurance claims – a world record at the time.

For the insurance and reinsurance industries, Andrew was much more than just a costly natural catastrophe. The claims costs, though huge, eventually became a memory. But there were other impacts that were far more important – and far longer lasting.

Eight insurance companies went bankrupt as a direct result of the storm and three others failed as an indirect result. Andrew, thus, served as a wakeup call to Florida lawmakers and insurance regulators: If eight companies could go bankrupt from a $15.5-billion loss, what if claims costs were double? Triple? Quadruple?

Andrew also caused a disconcerting availability crisis for property insurance in the state of Florida as many insurers pulled back or left the market altogether. Reinsurers, who back insurers against catastrophic loss that could bankrupt them, also determined that they were overexposed to Florida hurricanes and pulled back.

The band-aid was the creation of both a 'temporary' state-run property insurer of last resort and the Florida Hurricane Catastrophe Fund, essentially a state-run reinsurer of last resort. Additionally, the geographic scope of the state wind insurance pool, first created in 1970, was expanded to include more eligible Florida properties.

The two 'temporary' carriers of last resort are still in operation today.

Story continues below advertisement

Perhaps one the biggest changes to come out of Andrew, however, was the creation of one of the best wind building codes in the world. The code not only established sound construction practices to prevent loss of life from extreme wind events, but also triggered the availability of wind resistant building materials, including windows, doors, garage doors and skylights.

Yet, just a few hurricane-free years after Andrew, legislators began discussions to roll back the strict provisions set out after the iconic storm. State lawmakers began to consider a new statewide building code to consolidate and homogenize Florida's 450 local codes. New provisions considered included no longer requiring storm shutters and reducing from eight to three the number of inspections required during construction.

More recently, other changes to Florida's code have been under consideration and detractors fear that they will bring the state back to a pre-Andrew-like code.

Before Andrew, the worst-case insured loss scenario for a U.S. hurricane was pegged by experts at $8-billion. An insured loss of more than that was not even being considered let alone planned for. As a result, the insured loss total from Andrew was a shock.

Some loss models currently have total Hurricane Irma damage in Florida at $125- to $250-billion.

Since August 1992, almost every time a tropical storm in the North Atlantic matures into a hurricane, it gets measured against Andrew. Much like a younger sibling, attending high school for the first time, gets compared to his overachieving elder brother.

Story continues below advertisement

But if Irma plays out as the computer models indicate and the experts fear, it will set a new benchmark.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies