Clark: expect a $10b Loss every 4 Years from Hurricanes Anew report by Karen Clark & Co. says storms capable of major losses are not as infrequent as we might as- sume. In fact, the United States can antic- ipate insured losses of at least $10 billion from a hurricane an average of every four years, based on an analysis of more than a century of hurricane experience. Using a new methodology, Clark’s firm ran nearly 180 U.S land-falling hur- ricanes through a formula to determine which storms would likely cause at least $10 billion of insured losses if they were to strike today.
The results of Clark’s multi-month-long
project shift the common perception of the
worst storms in terms of insured loss due to
denser areas, especially on the coast, as well
as larger and more valuable buildings that
exist today. For example, 2005’s Hurricane
Katrina—known as the costliest hurricane
in U.S. history at about $40 billion—falls to
the seventh position on this new list.
The top spot—by far—now belongs
to an unnamed storm, the “Great Mi-
ami Hurricane” of 1926. Clark’s experts
in catastrophe risk, models and risk
management say the storm would cause
a whopping $125 billion in losses today.
The second costliest storm would be the
1928 Okeechobee (Florida) Hurricane at
about $65 billion, according to the report.
would cause more damage than Katrina if
Andrew hit the same spot—just south of
Miami—today. Clark says Andrew’s in-
sured loss tally would be about $50 billion.
Andrew caused about $15.5 billion in
losses when it traveled over Florida 20
years ago. The losses were accurately pre-
dicted by Clark, founder of what is now
known as AIR Worldwide, back then.
Among the noteworthy findings of the
report is the fact just two storms from
CLaRK BeLIeVeS 1992’S HURRICaNe
aNDRew wOULD CaUSe MORe
DaMage THaN Ka TRINa IF aNDRew
HIT THe SaMe SPOT—JUST SOUTH
OF MIaMI—TODa Y. IN FaCT,
aNDRew’S INSUReD LOSS TaLLY
wOULD Be aBOUT $50 BILLION.
Interestingly 1992’s Hurricane Andrew
through His eyes: then-Fla. insurance
Commissioner remembers Andrew
On Aug. 24, 1992, with winds whipping at more than 165 mph, Hurricane Andrew made landfall at
Homestead, Fla. and tore through the
Sunshine State. Some say the damage
had to be seen to be understood. At least
that’s what the sister of Tom Gallagher
Gallagher, then the Florida insurance
commissioner (as well as the state’s treasure and fire marshal) had made some
boilerplate remarks to the media following the storm about getting adjusters out
to the scene and paying claims. His sister thought his statements were insensitive—that they lacked a grasp of what
people had just been through.
“She said, ‘Don’t you have any com-
passion at all?’” Gallagher says, remem-
bering a phone call from his sister.
A month after Andrew left, a special
session of the state legislature was called to
basically shake out the cobwebs and figure
out a plan. By that time, Allstate already
told Gallagher they had plans to not renew
more than 800,000 policies, he says. Other carriers were coming up with similar
plans to non-renew, cancel, and reduce the