Insurance Industry Braces For Another Busy Hurricane Season

December 10, 1996

GAINESVILLE — Next year’s Atlantic hurricane season promises more storms – not a good prediction for South Florida, which still is paying for Andrew’s strike four years ago, said University of Florida professors.

“Scientists now can predict with some accuracy that we will have a more active season next year than we did this year,” said James Cato, director of the Florida Sea Grant College Program at UF. “This is based on long-term climatic trends and weather patterns and signals a possible return to the more frequent storm patterns of the 1930s and 1940s.”

Andrew caused more damage than previous hurricanes because of the intensity of the storm, the area in which it hit and the residents’ lax attitudes towards the storm.

“Florida had not experienced a hurricane of this intensity in decades,” Cato said. “In the decade between these major storms, people got complacent.”

The two decades before Andrew was a time of few storms and major growth in Florida, with population increasing from 9 million to 13 million and with most growth occurring in the coastal counties.

“In this period, homeowners, developers and insurance companies all got complacent,” Cato said. “All of a sudden homeowners were hit with these huge losses, and the insurance companies were not prepared to pay up for these large one-time losses.”

Although most of Andrew’s damage has been repaired in the years following the storm, the hurricane’s effect still is felt in the private homeowner’s insurance market.

“Eleven insurance companies went broke as a result of the damage from Andrew,” said UF business professor David Nye. “Andrew really shocked the private insurance industry

as to how much could be lost from another such storm. The industry had to re-evaluate and cut back on their level of underwriting.”

Because of this insurance emergency, the state of Florida created the JUA, the joint Underwriting Association. The JUA is the second-largest insurance company in the nation now, with about 900,000 policies.

“The goal is to cut the JUA to half the size it is now, to start incentives to get private insurance companies to take policies away from the JUA,” Nye said.

The state is encouraging private insurance companies to take these policies from the JUA by offering bonuses to private insurance companies, which officials hope will stabilize the insurance market just in time for the 1997 hurricane season. Many of the buildings along Florida’s coast also will have to be strengthened before the season.

“We need to improve construction standards and codes to build more hurricane-proof buildings,” Cato said. “The real problem is the existing stock of buildings that were built prior to the 90s. We need to go into these buildings and offer incentives for builders and homeowners to make changes to better withstand a hurricane.”

Andrew’s damage was about $16 billion. If the storm had veered north to greater Miami, it is estimated the damage would have been $40 billion to $50 billion.