Swiss Re: A Storm Like 1926's Great Miami Hurricane Would Cost $200bn
The National Hurricane Center says a system off Bermuda could grow into a Category 5 storm that would cost insurers up to $300 billion if it hits Miami.
On Thursday, the National Hurricane Center said a system forming east of Bermuda could soon develop into a tropical storm. With the Atlantic season fairly quiet so far, Swiss Re said in a report released this week that if the system strengthens into a Category 5 hurricane and strikes a heavily populated city such as Miami or Tampa Bay, insured losses could top $300 billion, more than any previous insured-loss event.
The Zurich-based reinsurer recalled that one of the most damaging storms to hit Florida struck a century ago, the 1926 Great Miami Hurricane. A Category 4 storm of similar strength today would cause about $200 billion in insured losses, the report said. By comparison, Hurricane Ian, which hit western Florida as a Category 4 in 2022, caused roughly $63 billion in insured losses, according to calculations by Karen Clark & Co. and other firms.
Balz Grollimund, head of catastrophe perils at Swiss Re, said in the report: "One hundred years after the Great Miami Hurricane, the question is not simply how powerful the next major hurricane will be, but what it will encounter when it reaches shore. That lesson extends well beyond Florida: as populations and asset values increase in areas exposed to natural catastrophes, so does the potential for large insured losses."
Swiss Re estimated that a storm similar to Hurricane Andrew, which made landfall near Miami 34 years ago and changed the state's building codes and construction practices, would today cause almost $100 billion in insured losses. Andrew caused an estimated $25 billion in insured losses in today's dollars. The increase in loss costs reflects not only decades of inflation but also a population boom in Florida and widespread high-end property development.
"A century of population and property growth has transformed the potential impact of a hurricane striking Miami-Dade County," the report said, noting that just over 100,000 residents lived in the area when the Great Miami Hurricane struck in 1926, compared with around 2.8 million in Miami-Dade today.
The reinsurer said more than two million homes in the Miami metropolitan area, with a combined reconstruction cost exceeding $600 billion, are now at moderate or greater risk of hurricane wind damage. It also said Florida property insurers may be better prepared today for a monster storm hitting a major city, at least by some measures, noting that traditional and alternative reinsurance capacity can be more effective when supported by catastrophe modeling, disciplined accumulation management and effective mitigation.
"Growth in both traditional and alternative reinsurance capital may help keep pace with rising natural catastrophe risks. US wind is the dominant risk in the $60 billion cat-bond market, and Florida tail-risk capacity in the reinsurance and retrocession markets relies heavily on additional alternative capacity," the report said. It added that stronger building codes and wind-resistant construction can help reduce hurricane losses, noting that updated standards helped newer Florida homes withstand Hurricane Ian, while replaced and storm-proofed roofs further reduced vulnerability. The report's authors are Lucia Bevere, senior catastrophe data analyst; Erik Lindgren, wind perils lead; and James Finucane, head of life and health economic research at the Swiss Re Institute.