The killer Category 5 hurricane that led to the creation of Bermuda’s catastrophe reinsurance business – one of the most costly storms ever to hit the US – is being re-examined through an article in Best's Review.

In 1992, Hurricane Andrew virtually recreated the catastrophe reinsurance business in Bermuda’s image, blowing what was at the time unprecedented capital offshore to form much needed programmes to improve the financing of catastrophe risks.

In so doing, it created the genesis of the broader reinsurance market that exists today on the island.

The Insurance Information Institute estimates Andrew caused $30 billion in insured losses in 2021 dollars, fundamentally changing the face of the global reinsurance market.

The storm, with 65 recorded deaths (44 in Florida alone), left the Bahamas and struck several US states, leaving several insolvent insurance companies in its wake.

The void that was left opened the door for the capital markets to create something different.

Eight new reinsurers were formed in Bermuda, with years ahead of them to write catastrophe reinsurance more judiciously and from an unencumbered capital platform.

The first was Mid Ocean Re, technically in 1992, but quickly followed by a bunch more by the following summer, collectively called the Class of 93.

The drive of new capital to Bermuda came with new ideas and top reinsurance executives who moved to the island to lead small, focused, talented teams, to do what was not being done onshore – what could not be done onshore.

The Best Review report said that along with the eight new Bermuda reinsurers, came enterprise risk management, risk-based capital requirements and the use of catastrophe models.

The report said: “It also placed the Bermuda reinsurance market in the forefront of global reinsurance coverage.

“Bermuda reinsurers make up about 36 per cent of the global reinsurance market based on property/casualty net premiums earned, according to AM Best.

“Domestically, they provide more than 60 per cent of the hurricane reinsurance in Florida and Texas, according to the Association of Bermuda Insurers and Reinsurers.”

Stephen Weinstein, the Bermuda Business Development Agency chairman, was quoted: “Bermuda has a vested interest in seeing a healthy Florida, a stable Florida where companies provide valuable coverage and survive an event to trade into new markets and new cycles.

“The challenges that Florida has encountered over these last few years are not only a challenge for Florida consumers and Florida insurers, but to their partners in Bermuda.”

“Florida and Bermuda are connected virtually at the hip,” the article quotes RenaissanceRe senior vice-president and chief underwriting officer for property Justin O'Keefe, who noted that over the past few years, matters of litigation have contributed to RenaissanceRe reducing its participation in the Florida market.

The article said: “One of only four Category 5 hurricanes to hit the continental United States in the last century, Hurricane Andrew caused immense destruction that led to the insolvency of several Florida insurers.”

Mr Weinstein said: “Every dollar of capital for newly formed reinsurers in the immediate aftermath of Hurricane Andrew ended up in Bermuda.

“Every company that I was associated with chose Bermuda for what at the time was a robust regulatory environment.

“To some degree its location – 90 minutes outside of New York – was helpful, but so also the speed with which the capital was able to form and get into the market, which remains an advantage in Bermuda today.”

30 Years After Hurricane Andrew, Bermuda Reinsurers, Florida ‘Joined at the Hip’