In 1992, the financial fallout from Hurricane Andrew made it clear to insurers and regulators that natural disasters have a significant impact on the industry's ability to diversify and contain catastrophic risk. With 790,000 insurance claims and $26 billion in damage ($15.5 billion of it insured), Andrew became the costliest catastrophe in U.S. history.
Although catastrophe models are now used to spread the risk associated with catastrophes of that magnitude, there is still room for improvement.
According to the National Conference of Insurance Guaranty Funds, insurance company insolvencies resulting from Andrew led to nearly 25,000 unpaid claims totaling $500 million.
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