The insurance sector is more about evolution than revolution. The changes in your breast are usually progressive and what is said “non-traumatic.” It is difficult to find dates in the world of insurance that mark a before and after. But that doesn’t mean they don’t exist. In fact, on August 16, just a quarter of a century ago, one of them. From the day Andrés changed everything.
Andrés is not an insurance executive, an actuary, or anything like that. Andrew is a hurricane. Hurricane Andrew, which hit the Bahamas between August 16 and 28 and then jumped to the southeastern coast of the United States, passed through Florida and reached Louisiana. So far, so good because there have been many hurricanes with that route; that is a super hurricane area. Andrew, however, was different.
natural catastrophe insurance losses
Until Andrew, there was a consensus in the insurance companies, more or less complete, that it was possible to discern the damages that a natural catastrophe would cause from the data already collected from past storms, tornadoes, and hurricanes. Andrew, however, with his 27,000 million dollars in losses and 65 dead, fell out of the pentagram.
To what extent these super losses were a consequence of the very virulence of the meteorological events or of the excessive urbanization of some areas is something that experts continue to discuss. But what is a fact is that almost no model derived from previous events would have predicted so many losses.
Andrew left 27,000 million dollars in losses and 65 dead
The problem for the risk experts, moreover, was that Andrew had not even shown his worst side: if his trajectory had been located a little further north, he would have passed through the city of Miami, surely generating many more victims and losses than the what gender.
Most expensive natural disaster insurance
There have only been three events costlier to insurance than Andrew: Hurricane Katrina in 2005, which killed 1,836 people and cost nearly $81 billion; the earthquake and tsunami in Japan in 2011, with its 18,451 deaths and 37,000 million dollars of insured losses; and Hurricane Sandy, which caused 237 deaths and 30,000 million losses. But Andrew, despite being cheaper, is still the one who set off the alarm bells in insurance and considered that he had to do things differently.
To give you an idea of how brutal these figures are, the worst catastrophic event in history in Spain: the so-called cold drop that occurred in the summer of 1983 in the Basque Country, Navarra and Cantabria, cost just under 1,000 million euros. Dollars and caused 42 victims.
The worst catastrophic event in history in Spain: the so-called cold drop that occurred in the summer of 1983 in the Basque Country, Navarra and Cantabria, cost just under 1,000 million dollars and caused 42 victims.
Today, insurers take extreme events very seriously. In fact, the new European risk calculation system, called Solvency II, dedicates a lot of pages and formulas to catastrophic risks. They are complex calculations that consider various scenarios (modeling the damage if the events described in the scenario were to occur) and take into account geographic correlations (which is logical: if there is an earthquake in Turkey, it is possible that there may be losses in Greece; but it will be difficult for them to appear in Portugal).
In essence, then, today insurers are obliged by law and by their own prudence as managers to constantly ask themselves what they would face if something very complicated were to happen, taking into account, obviously, the exposure of each one (well, it is the same to do business in a hurricane or earthquake zone than in another that does not present this type of activity). And, in the Spanish case, we must not forget that we have our own system, based on the Insurance Compensation Consortium, which helps equalize catastrophic insurance and deal with the worst news in an organized and efficient manner.