
Hurricane season began on June 1st. Now is a good time to read and understand your policy.
When and why did hurricane deductibles come to be?
In 1992, Hurricane Andrew caused $15.5 billion insured losses, making it the most expensive storm ever for insurers, with claims costing nearly four times as much as 1989’s Hurricane Hugo. It soon became apparent through an assessment of catastrophe-risk computer modeling, and residential development patterns, that home insurers were far more vulnerable to significant weather-related claims payouts than they had previously thought. Some of the largest insurers found it difficult to secure the reinsurance coverage they needed to protect their bottom line because reinsures were unwilling to assume so much risk. To get coverage from reinsurers, insurance companies agreed to greatly reduce their potential maximum claims payouts from hurricanes by requiring their policyholders to bear a greater share of the cost.