Natural disasters can cause a lot of strife for home insurance companies. While snow storms knock out power lines, hurricanes flood homes and damage buildings, and droughts cause fires along forested areas, insurance companies sweat knowing that they will suffer some major losses from inevitable forces of nature. The past 10 years or so haven’t been especially kind to the insurance industry, with unprecedented losses clustered in a relatively short time span.
The Loma Prieta earthquake in San Francisco marked one of the most costly earthquakes all time, accruing a staggering $960 million in insured losses. San Francisco’s Oakland Bay Bridge collapsed, various buildings in the Marina district either collapsed or caught fire, and an estimated 12,000 homes were damaged. Unfortunately, 1989 was also the year that Hurricane Hugo hit. Hurricane Hugo was the most costly hurricane of its time, costing insurance companies around $4 billion in damages. It was the first hurricane to break into the billions in terms of insurance losses. It was a category five hurricane that struck South Carolina, with Charleston suffering the brunt of the damage.
The worst year in insurance history up to that point in time, 1992 featured a slew of unfortunate disasters including hurricanes, earthquakes, hailstorms, fire-inducing droughts, and the man-made disaster of riots. With a collective insurance loss somewhere in the ballpark of $20 billion, insurance companies were truly cringing. Hurricane Andrew alone cost insurance companies an estimated $10.7 billion. Striking the Northwest Bahamas, Florida, and Louisiana, it left 250,000 people homeless in its wake. Other disasters, minor in comparison, included the two earthquakes that California suffered on June 28 as well as serious rainfall in Texas that killed 15 people.
This year will always be memorable for the attacks on the World Trade Center and the Pentagon on September 11. Everyone was impacted by the tragedy, and insurance agencies were no exception, with losses at $39.5 billion. The majority of the costs came from business interruption, worker’s compensation, and life and liability. There was also debris damage to take into account. In fact, the attacks on 9/11 prompted insurance agencies to begin considering pushing terrorism insurance to their clients.
In a measly six weeks during 2004, Florida was struck with four of the 10 worst hurricanes to date. Cumulatively, they cost insurance companies a surplus of $22 billion. The four hurricanes were known as Charley, Frances, Ivan, and Jeanne. Charley did the worst damage, destroying more than half the homes in Charlotte County where it hit. It also brought upon 12 total deaths. Collectively, the four hurricanes known as the “hurricane train” resulted in the damage of one out of every five Florida homes in 2004.
Hurricane Katrina cost insurers $55 billion, rendering it the costliest disaster in the history of the United States. Amidst the mandatory evacuation, about 300,000 people were unable to get out on time and were forced to take refuge in the Superdome, their homes, or other last minute shelters. Flooding from Katrina rose up to 20 feet in some places. More than a million people were displaced, and an estimated 275,000 homes were demolished as a result of the storm.
This was the year of the British Petroleum oil spill, which occurred in the Gulf of Mexico. The oil spill caused the insurance industry a loss of $3.5 billion, which could have been much higher had BP not been self-insured. The spill amounts to millions of gallons of oil, creating wreckage on 100 miles of coastline. Lloyd’s of London gave an estimate of $300 million to $600 million in claims from the disaster. Shockingly, no hurricanes touched down on the U.S. in 2010. However, severe thunderstorms and tornadoes between March and May caused losses of a collective $3.5 billion.
The multitude of catastrophes in the United States during 2011 made it the costliest year in history for the U.S. insurance industry, with upwards of $32 billion total in losses. There were 12 major disasters, each of which amounted to at least $1 billion in damages. Some of the disasters included the Groundhog Day Blizzard, a slew of tornadoes between April and May, the Mississippi River flooding, Hurricane Irene, and the wild fires along Texas, Arizona, and New Mexico. Furthermore, because of the new Healthcare Reform, a great deal of insurance agencies saw a large drop in commissions given the cap that was placed on administrative expenses and profits.