25 years after the devastating Hurricane Andrew struck South Florida, Swiss Re calculated what the loss levels would be today if the same hurricane hit the region, revealing insured losses would double to reach $50-60 billion, and economic damage would exceed $80 to $100 billion.
This is due to stark development and asset value growth – increased migration to the area has led to a Miami-Dade County population growth of nearly 35% since 1992, Swiss Re said.
As one of the most-developed regions of the U.S., combined residential values in Miami-Dade, Broward and Palm Beach Counties are now estimated at $660 billion, and $550 billion in commercial values.
Swiss Re’s tropical cyclone model shows that if Andrew Florida struck in the same footprint today, assuming a similar coverage percentage by the insurance industry, “the physical damage would exceed USD 80bn to USD 100bn, before accounting for long-term economic impacts such as lost tax and tourism revenues.”
If Andrew were to fall directly over Miami, calculated model losses to the insurance industry would reach record levels, ranging from $60 billion to $180 billion, assuming a 60% insurance-industry coverage rate, the report found.
“By way of comparison, if the 1926 Great Miami Hurricane, a Category 4 hurricane that struck Miami and Miami Beach, recurred today under current conditions, it would produce losses right in the middle of the range: $122 billion in insured losses and an estimated $200 billion in economic losses,” Swiss Re explained.
However, it doesn’t take a high-intensity hurricane to cause major surge losses, climate change impacting rising sea level has increased flood-risk to the region.
To counteract this growing surge risk, Miami has been stepping up its resiliency efforts, recently undertaking a pilot project to expand flood protection with a $400 million investment in sea pumps, improved roads and sea walls.
The Swiss Re report highlights the need for an ongoing focus on resiliency efforts and cautions firms and individuals in the highly developed hurricane-prone zones, to consider if current insurance instruments could cover financial needs in the event of a significant loss, like an Andrew.