IDEAS home Printed from https://ideas.repec.org/a/bla/rmgtin/v25y2022i3p239-270.html
   My bibliography  Save this article

The 30th anniversary of hurricane Andrew: Evolution of the Florida homeowners insurance market

Author

Listed:
  • Gabriel Carrillo
  • Dana Telljohann
  • Charles Nyce

Abstract

Hurricane Andrew made landfall in Homestead, Florida as a category 5 hurricane on August 24, 1992. This 30‐year anniversary review examines the changes within the Florida and coastal United States homeowners insurance markets. We review market changes specifically related to market concentration, risk pricing, and volatility. We find that most states have become less concentrated since the early 1990s. We also find that risk pricing has changed since Hurricane Andrew with the creation of a new catastrophe market where insurers rely on catastrophe models to help price catastrophe‐prone risks. Finally, we see that most states did not experience much volatility over the 30 years following Hurricane Andrew, with Florida being an exception. This is most likely due to the large population growth, increase in fraudulent claims, and high litigation costs. Overall, Hurricane Andrew changed how the insurance industry viewed catastrophic events and thus changed how they manage, model, and price catastrophe‐prone areas.

Suggested Citation

  • Gabriel Carrillo & Dana Telljohann & Charles Nyce, 2022. "The 30th anniversary of hurricane Andrew: Evolution of the Florida homeowners insurance market," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(3), pages 239-270, September.
    • Handle: RePEc:bla:rmgtin:v:25:y:2022:i:3:p:239-270
    DOI: 10.1111/rmir.12222
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rmir.12222
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rmir.12222?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Cummins, J. David & Doherty, Neil & Lo, Anita, 2002. "Can insurers pay for the "big one"? Measuring the capacity of the insurance market to respond to catastrophic losses," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 557-583, March.
    2. Patricia Born & W. Viscusi, 2006. "The catastrophic effects of natural disasters on insurance markets," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 55-72, September.
    3. M. Martin Boyer & Richard Peter, 2020. "Insurance Fraud in a Rothschild–Stiglitz World," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(1), pages 117-142, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Georges Dionne & Denise Desjardins, 2022. "A re‐examination of the US insurance market's capacity to pay catastrophe losses," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(4), pages 515-549, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georges Dionne & Denise Desjardins, 2022. "A re‐examination of the US insurance market's capacity to pay catastrophe losses," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(4), pages 515-549, December.
    2. Rim Jemli & Nouri Chtourou & Rochdi Feki, 2010. "Insurability Challenges Under Uncertainty: An Attempt to Use the Artificial Neural Network for the Prediction of Losses from Natural Disasters," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(1), pages 43-60, March.
    3. Benali, Nadia & Feki, Rochdi, 2017. "The impact of natural disasters on insurers’ profitability: Evidence from Property/Casualty Insurance company in United States," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1394-1400.
    4. Patricia H. Born & Barbara Klimaszewski-Blettner, 2013. "Should I Stay or Should I Go? The Impact of Natural Disasters and Regulation on U.S. Property Insurers’ Supply Decisions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 1-36, March.
    5. Lorilee A. Medders & Charles M. Nyce & J. Bradley Karl, 2014. "Market Implications of Public Policy Interventions: The Case of Florida's Property Insurance Market," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(2), pages 183-214, September.
    6. Linda Allen & Anthony Saunders, 2004. "Incorporating Systemic Influences Into Risk Measurements: A Survey of the Literature," Journal of Financial Services Research, Springer;Western Finance Association, vol. 26(2), pages 161-191, October.
    7. Howard Kunreuther, 2002. "The Role of Insurance in Managing Extreme Events: Implications for Terrorism Coverage," Risk Analysis, John Wiley & Sons, vol. 22(3), pages 427-437, June.
    8. M. Boyer & Charles Nyce, 2013. "An Industrial Organization Theory of Risk Sharing," North American Actuarial Journal, Taylor & Francis Journals, vol. 17(4), pages 283-296.
    9. Andreas Richter & Thomas C. Wilson, 2020. "Covid-19: implications for insurer risk management and the insurability of pandemic risk," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 45(2), pages 171-199, September.
    10. Sana Sheikh & Ali Murad Syed & Syed Sikander Ali Shah, 2018. "Corporate Reinsurance Utilisation and Capital Structure: Evidence from Pakistan Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(2), pages 300-334, April.
    11. Nell, Martin & Richter, Andreas, 2002. "Improving risk allocation through cat bonds," Working Papers on Risk and Insurance 10, University of Hamburg, Institute for Risk and Insurance.
    12. Breckenfelder, Johannes & Maćkowiak, Bartosz & Marqués-Ibáñez, David & Olovsson, Conny & Popov, Alexander & Porcellacchia, Davide & Schepens, Glenn, 2023. "The climate and the economy," Working Paper Series 2793, European Central Bank.
    13. Ben Ammar, Semir & Eling, Martin & Milidonis, Andreas, 2015. "Asset Pricing of Financial Insitutions: The Cross-Section of Expected Stock Returns in the Property/Liability Insurance Industry," Working Papers on Finance 1516, University of St. Gallen, School of Finance.
    14. Nell, Martin & Richter, Andreas, 2004. "Catastrophic events as threats to society: Private and public risk management strategies," Working Papers on Risk and Insurance 12, University of Hamburg, Institute for Risk and Insurance.
    15. Antonio Coviello & Giovanni Di Trapani, 2013. "Supply Risk Management: Mitigation Strategy," The International Journal of Economic Behavior - IJEB, Faculty of Business and Administration, University of Bucharest, vol. 3(1), pages 169-176, December.
    16. Mary Kelly & Anne Kleffner & Grant Kelly, 2020. "An examination of catastrophes, insurance guaranty funds and contagion risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(2), pages 256-280, April.
    17. Huber, Michael, 2002. "Conceptualising Insurance: risk management under conditions of solvency," LSE Research Online Documents on Economics 35991, London School of Economics and Political Science, LSE Library.
    18. Noth, Felix & Rehbein, Oliver, 2017. "Badly hurt? Natural disasters and direct firm effects," IWH Discussion Papers 25/2017, Halle Institute for Economic Research (IWH).
    19. Vijay Aseervatham & Patricia Born & Dominik Lohmaier & Andreas Richter, 2017. "Hazard-Specific Supply Reactions in the Aftermath of Natural Disasters," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 193-225, April.
    20. Alexis Louaas & Pierre Picard, 2021. "Optimal insurance coverage of low-probability catastrophic risks," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 46(1), pages 61-88, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rmgtin:v:25:y:2022:i:3:p:239-270. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1098-1616 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.