When Andrew hit South Miami-Dade on August 24, 1992, it destroyed roughly 49,000 homes and damaged 108,000 more. Insurers paid out $15.5 billion, triple what industry veterans had predicted for a comparable storm. One reason for the surprise: companies didn't actually know their own exposure. An agent later recalled insurers "driving street by street to count how many homes they insured because they didn't know."
The other problem was what those homes were made of. Insurers had priced risk assuming Florida's building codes were enforced. A Dade County Grand Jury found "decades of neglect and cutting of corners" by builders and code officials. The industry had modeled losses against code-compliant construction that didn't exist in the field. Eight insurers went insolvent. National carriers fled. The state, facing a market that had simply stopped functioning, built the public catastrophe reinsurance fund, a residual market insurer of last resort, and eventually Citizens Property Insurance. Those structures are still absorbing risk today. The original bet on code-compliant construction never did get any more honest.
Aug 1992: Andrew makes landfall as Category 5; first such storm in Florida since 1935, a 57-year gap that shaped insurer assumptions
Dec 1992: Legislature creates the Residential Property and Casualty Joint Underwriting Association as insurer of last resort; all carriers must participate
May 1993: Special session imposes moratorium on insurer withdrawals; carriers limited to nonrenewing 5% of policies per year
Nov 1993: Florida Hurricane Catastrophe Fund created; first reinsurance contracts effective June 1994
By 1997: Residual market policies explode from 62,000 to over 900,000; combined exposure tops $136 billion
1998: Legislature adopts single statewide building code after study commission finds 400+ local jurisdictions enforcing codes differently
2002: Citizens Property Insurance formed by merging prior emergency structures; by 2012 it holds 1.4 million policies