ABSTRACT
HURRICANE ANDREW RAVAGED the southern coast of Florida and states abutting the Gulf of Mexico in September 1992. It inflicted enormous social and economic losses, prompting the federal government to declare the hurricane's path a disaster zone. The hurricane also severely impacted the insurance sector, which had never experienced such a great catastrophic loss from a natural disaster. Those few days in September threw the insurance industry in shock, the insured losses having mounted to more than $16 billion. By comparison, the previous major windstorm in the region had been Hurricane Betsy in 1965, which resulted in losses of about $3 billion (1992$). The gap between the industry's perception of the probability of catastrophic loss and the reality of Andrew's destruction was a cautionary case of surprise in the insurance system.
