In 1992, the financial fallout from Hurricane Andrew made itclear to insurers and regulators that natural disasters have asignificant impact on the industry's ability to diversify andcontain catastrophic risk. With 790,000 insurance claims and $26billion in damage ($15.5 billion of it insured), Andrew became thecostliest catastrophe in U.S. history.

Although catastrophe models are now used to spread the riskassociated with catastrophes of that magnitude, there is still roomfor improvement.

According to the National Conference of Insurance GuarantyFunds, insurance company insolvencies resulting from Andrew led tonearly 25,000 unpaid claims totaling $500 million.

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