Are We Ready for a $100 Billion Catastrophe? How About $200 Billion?

livemint.com:

insurance industry, resulting in the rise of new kinds of reinsurers—firms that backstop other insurers—relying on computer models to price extreme risks. But were the same storm to repeat this year, it might cause a far bigger disruption. That is because a combination of climate change, economic and population growth, and inflation of all kinds has challenged insurers’ grasp of what exactly “the worst" entails.

Back in 1992, the Category 5 storm slammed into Florida south of Miami and cost insurers the then-scarcely-believable sum of about $16 billion. Simply adjusting for consumer price-index inflation, that translates to about $35 billion today. Yet much more than how far a dollar goes has changed in three decades.

Construction costs have inflated. Florida’s population has boomed. Property values have risen enormously.

Claims litigation has become more expensive. Now, industry estimates peg a replay of Andrew today at two or even three times the inflation-adjusted number, potentially adding up to a $90 billion or even $100 billion insurance loss. And that is before considering what might have happened had Andrew—or Hurricane Irma in 2017, if it had continued on an early course and intensity—actually hit Miami directly, with modeling firm Karen Clark & Co.

estimating that insured losses in such a scenario could be $200 billion. That challenge is part-and-parcel of what extreme-risk insurers do. But then there is what is happening at the other end of the risk curve, with events that historically are less severe but more frequent.