Thirty years after one of the costliest and most consequential natural disasters in American history, the (re)insurance industry is warning legislators and regulators that urgent action is needed to protect against man-made catastrophes.

The Association of Bermuda Insurers and Reinsurers is involved in an examination of how the tragedies from 1992’s Hurricane Andrew ultimately paved the way for positive community safety innovations through modern building codes and enhanced regional mitigation initiatives.

But the examination comes in a report released alongside a stunning declaration from Florida officials that the lion’s share of billions in paid insurance claims never reach the claimants.

According to the Florida Office of Insurance Regulation, in the past ten years, $51 billion has been paid in insurance claims and of that, 71 per cent went to attorneys’ fees and public adjusters while only 8 per cent went to claimants.

The report emerges among new, growing property insurance crises in many states resulting from man-made events — legal system abuse, government interference and fraud.

The paper is: It's Not Just the Weather: The Man-Made Crises Roiling Property Insurance Markets.

It has been published jointly by the American Property Casualty Insurance Association, the Reinsurance Association of America, Abir and Robert Hartwig, PhD, CPCU.

Mr Hartwig is the clinical associate professor of finance and director of the Risk and Uncertainty Management Centre at the University of South Carolina.

He commented: “Hurricane Andrew for ever changed the way American communities prepared for natural disasters.

“At the time, it was the costliest natural disaster in the United States with an estimated $27.3 billion in insured losses. In its aftermath, communities and states ultimately instituted stronger building codes and provided more investment in resiliency — both of which have undoubtedly saved countless lives.”

David A. Sampson, the president and CEO of APCIA, said: “Now, 30 years later, we are experiencing a new major catastrophe in states such as Florida, California and Louisiana.

“Except this one is man-made.

“Unchecked plaintiff bar tactics, legal system abuse, fraud and misguided government policies are having a significant impact on the availability and affordability of insurance for American families, individuals and businesses.

“For example, collectively these factors have driven the average Florida homeowner’s insurance policy to nearly $3,000 in 2022, roughly twice the US annual average.”

And Frank Nutter, the president of the RAA, said: “Unfortunately, this has all occurred even though Florida has not experienced a direct hit from a hurricane since 2018, underscoring the impact of disruptions these man-made forces have on the marketplace.”

He added: “In Florida alone, seven insurers went insolvent in the last two years and 14 other companies have stopped writing new policies to avoid similar stability risks.

“According to a report from the state’s insurance regulator, Florida accounted for 79 per cent of the nation’s homeowners’ insurance claim lawsuits, while making up only 9 per cent of the nation’s homeowners’ insurance claims.

“While Florida’s governor and legislature implemented positive reforms during a special session earlier this year that are a step in the right direction, it will take time and additional reforms to stabilise Florida’s volatile property insurance market.”

“Insurers are also facing increasing challenges in managing risk due to government mandates and interference,” said John Huff, the president and CEO of Abir.

“Insurers must be given flexibility to collect adequate premiums reflective of the exposure. When the private market is allowed to function in this way with less volatility and counterproductive constraints, this leads to increased competition and ultimately greater consumer choice.”

“Fraud related to property insurance claims is another issue that costs policyholders and impacts the marketplace,” said Mr Nutter.

“According to data from the Federal Bureau of Investigation, the cost of non-health-related insurance fraud is estimated to be more than $40 billion per year, which can translate to an additional $400 to $700 annually in insurance premiums for the average US family.”

Mr Sampson said: “Insurers are an essential part of society as they provide the financial protection needed to help families, businesses, and communities prepare for — and recover from — the unexpected.

“As natural disasters continue to increase in frequency and severity due to climate change, state leaders need to act on policies that will help create a healthy and sustainable insurance marketplace so that consumers can continue to protect the things that matter most to them. Because that’s what matters most to us.”

Mr Nutter added: “To fix broken property insurance markets in states like Florida, California and Louisiana, insurers and reinsurers urge state lawmakers and regulators to focus on addressing the underlying issues roiling markets and harming consumers, including implementing legal system reforms and anti-fraud measures, as well as promoting regulatory stability and disaster mitigation to help reduce future losses.”

It's Not Just the Weather: The Man-Made Crises Roiling Property Insurance Markets.