Catastrophe Model-Based Assessment of Hurricane Risk and Estimates of Potential Insured Losses for the State of Florida

摘要

The state of Florida has about $1.8 trillion worth of residential property at risk of hurricane induced loss, and the hurricanes of the past few years have created a crisis in the homeowner insurance market. There is great uncertainty about the nature of the risk and the potential losses for the state as well as the insurance and reinsurance industries, and rates have consequently increased dramatically. This paper discusses the nature and use of a public catastrophe model to assess hurricane risk and estimate potential losses. It briefly explains the model design and then presents estimates of the average annual insured losses and probable maximum insured losses for the state of Florida. It also presents scenario-based loss estimates for Category 1 through 5 hurricanes land-falling at various locations in the state. The average annual insured loss for the residential properties in the state of Florida is estimated to be around $5 billion before deductibles and $3 billion after deductibles. And a 50-year hurricane is expected to cost the insurance industry about $26 billion, whereas the net cost to homeowners will be around $14 billion.